We describe a new watermarking system based on the principles of informed coding and informed embedding. This system is capable of embedding 1380 bits of information in images with dimensions 240×368 pixels. Experiments on 2000 images indicate the watermarks are robust to significant valumetric distortions, including additive noise, low-pass filtering, changes in contrast, and lossy compression. Our system encodes watermark messages with a modified trellis code in which a given message may be represented by a variety of different signals, with the embedded signal selected according to the cover image. The signal is embedded by an iterative method that seeks to ensure the message will not be confused with other messages, even after addition of noise. Fidelity is improved by the incorporation of perceptual shaping into the embedding process. We show that each of these three components improves performance substantially.