It's a theme, but is usually (if not always packaged with it's respective ROM).
a ROM is the basic "os" software that you put on your phone. A theme is what makes it look cool. A theme can be ported to more than one ROM, so you can see a Bugless Beast Watermark'd and a Simply Stunning Watermark'd. Usually, you have to install a ROM first, and then a theme over it. In Watermarked's case, all the DL links are for full ROMS; the theme has already been applied over the ROM and you don't need to take the extra step.