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When building forms, you need to effectively communicate with the user what information should be placed inside of the text boxes. I've seen a combination of watermarks in text boxes and labels for them.
If watermarks are used, what if the user forgets about exactly they need to enter? For instance they leave the page for a while because they got distracted or for some other reason. They have to remove their info before they can know exactly what they need to enter.
Google for instance uses watermarks for their log in form
But then on their sign up page they use labels and watermarks
So what is the preferred method? Should labels be used, should watermarks be used, A combination of both, or does it entirely depend on the circumstances?