With the improvements in the quality of Commercial-Off-The-Shelf (COTS) printing and scanning devices, the ability to counterfeit documents has become a widespread problem. Consequently, there has been an increasing demand to develop digital watermarking techniques which can be applied to both electronic and printed images (and documents) that can be authenticated, prevent unauthorized copying and withstand abuse and degradation.  In this paper, a new approach to digital watermarking is presented and a range of possible applications considered. The process is defined by using concepts and techniques borrowed from Cryptography. It is based on computing a ‘scramble image’ by diffusing a watermark image with a noise field (a cipher). The cover image (covertext) is then introduced using a simple additive process (confusion). The watermark is subsequently recovered by removing the covertext and then correlating the output with the original (key dependent) noise field. For covert encryption, this approach provides the user with a method of hiding ciphertext (the scrambled image) in a host image before transmission of the data. With regard to document authentication, we consider a diffusion only or ‘texture coding’ approach that is robust to a wide variety of attacks including geometric attacks, crumpling, and print/scan attacks are considered.