You have to have a PostScript printer for it to work.
There are quite a few things you can do with a PostScript driver on your machine, even if you don't have a PostScript capable printer - but you can't directly print PostScript without a !PS RIP, in software or integral to the printer.
Most recent model laser printers will accept PostScript, but you do need to check individual models; and it's sometimes hard to get the makers to admit it even when they do. (At my last lookup, QMS laser printers all preferred PostScript input.)
You can get "software RIP" (Raster Image Processor) programs, but they're generally in the 0.5 - 0.8 K$ range, so they're impractical for most of us.
Inkjet printers with integral PostScript started at about $4K (US) last time I looked; but I expect them to hit the market at reasonable prices any day now... (holding my breath and turning blue).
For the "watermark," in Word on a PostScript printer, you just put the watermark script in the header, in a "{print \p}" field, set top margin negative in Page Setup, script whatever you want to be in the watermark and "0.98 setgray" or so ahead of it in the script. The header will print first, pale gray, and text in the document will overprint it.
You should be able to put a graphic (Insert Picture) of the watermark you want in the header, with the same "negative top margin" and get the same effect on any printer. The problem would be producing a picture that's "washed out" enough for the overprinted text to be legible. To locate the watermark where you want it, the graphic would need to be near "page size." I may have to experiment.
The "official" ways in recent Word use the "Format|Themes" and "Insert Watermark" commands, but instructions are a bit vague, and I haven't messed with them.