Digital watermarking is a technique in which a secret image is embedded into host image. watermarking is used in a variety of applications such as copyright protection, covert communication, Tamper proofing and Medical applications. For the embedding purpose spatial domain techniques were used in early days. Now various transform domain techniques are used for the embedding purpose. some of the transform domain techniques are Discrete Cosine Transform, Discrete Fourier Transform, Curvelet transform and Contourlet transform. Among these transform domain techniques contourlet transform is used because of its ability to deal with two dimensional images. Contourlet transform represent images containing contours and textures very efficiently as it is a geometrical image based transform. Contourlet transform has played a major role in producing the watermarked image with good perceptual quality.