"To figure out what the problem is, I’d like to look at what problem the watermarks are trying to solve. Obviously, it’s people trying to protect their work. But in reality, does that work?"

Hmmm... maybe, I think there is a far more practical reason to watermark an image, and that is to establish brand. This is basic marketing savvy stuff.

I do not recommend watermarks for portfolio work, or on promo sites, but for sharing with folks on sharig sites, the best way to get known is to get known - and that is what a watermark does.

In addition, if you can prove someone removed your watermark, they will lose any sort of IP theft you use. But in reality, very few people have the resources to go after someone who stole their art. Practically impossible. So... meh, nothing to really do there.