A watermark is an invisible mark placed on an image that can be detected when the image is compared with the original. The mark is designed to identify both the source of an image as well as its intended recipient. The mark should be tolerant to reasonable quality lossy compression of the image using transform coding or vector quantization. Standard image processing operations such as low pass filtering, cropping, translation and rescaling should not remove the mark. Spread spectrum communication techniques and matrix transformations can be used together to design watermarks that are robust to tampering and are visually imperceptible. This paper discusses techniques for embedding such marks in grey scale digital images. It also proposes a novel phase based method of conveying the watermark information. In addition, the use of optimal detectors for watermark identification is also proposed.