I take my pictures with my iPhone 4S using the Camera + app. I make sure to wipe my camera lens before so the picture is clear. I place my hand under my white fluorescent desk lamp and take about 20 pictures in a span of one minute.
Sometimes it's SO hard to take a picture of a mani with dark colors. When I do a red or purple mani it never shows up like it looks in real life. I always try to use the bottle that will make my fingers look like they're in white light as opposed to yellow. I take the picture a little far away to where you can see my hand then crop it. Camera + lets you crop it in a square instagram ready shape.
To watermark I use "iWatermark." You can also use "typerdrawing" to do a curved watermark around your cuticles but I suck at making it look like a natural curve.
Let me know if you have any questions I can answer!