A transform domain watermarking technique which is based on a new encoding scheme referred to as scaled bin encoding which encodes a message in a set of transform coefficients by modifying their values in a way that preserves high image quality (i.e., low distortion levels) and adapts to expected noise level. Recapturing of the watermark image is performed via a decoding method using a maximum likelihood procedure (i.e., maximum likelihood decoding, based on the statistics of the transform coefficients and a worst case statistical model of the noise introduced to these coefficients by image processing operations or attack noise.