The display size you selected for the watermark in the Account Settings > Business > Branding > Watermarks > Manage section affects the appearance of the watermark in the gallery.
So if you select "Large" for the Smallest Size, the watermark will not appear on Thumbnails, Small or Medium display sizes only from Large display size (and above). If you select Medium display size, it won't appear on Thumbnails and Small display sizes, only from Medium and above, etc.
Samples - using that setting shown on the above screenshot:
IMPORTANT: if you change the display size for the watermark in the Account Settings > Business > Branding > Watermarks section, the change WILL NOT APPLY automatically to those images which were watermarked earlier. You will need to re-apply the watermark to those images in the gallery via the Organizer.