Step 1.
Start by opening a new image file 400 x 400 pixels with a White background.

- Select Adjust > Add/Remove Noise > Add Noise
- When the option window opens set the Noise to 100% and click Randim Noise
- Repeat the step once more ( Adjust > Add/Remove Noise > Add Noise ) with the same             settings
- Now choose Adjust > Blur > Gaussian Blur and set the Radius to 5.00
- Then select Adjust > Brightness/Contrast > Threshold
- When the Threshold window opens set the Threshold level to 199 and click OK
- Once again choose Adjust > Blur > Gaussian Blur and set the Radius to 5.00
- And then repeat Adjust > Brightness/Contrast > Threshold
- This time when the Threshold window opens, set the Threshold level to 210 and click OK

You should have the image shown below.
Step 2
Leave everything as is and open a new image file with the same 400 x 400 pixel dimensions. Call this file Droplets. This time fill the new window with one of the pre-defined Black-White gradients in PSP 7.0 or create one yourself. If you create one yourself use a dark Gray color in place of the Black. Position the gradiend so that it is at a 45 deg angle. The dark portion of the gradient should be in the lower left hand corner and the light portion in the upper right.

- Now choose Selection > Select All, then click Edit > Copy
- Move to the previous image (Water) and make it active by clicking its title bar
- Select the Magic Wand tool and click in any part of the White background to select it
- Now choose Edit > Paste > Paste as New Layer to fill image with the gradient

You should now have the image shown below
Step 3
Choose Selections, Invert
Edit, 3D Effects, Inner Bevel and enter the settings shown in the option window below

You should see the water droplets start to appear.
With the Water Image active and the selection still in place, chose Edit, Copy
Now move to the Droplets image which contains the gradient and make it active by clicking on its title bar.
Then select Edit > Paste > Paste as New Layer to place the water droplets over the gradient.
Step 4
Go to the Layers Palette and open it.
Click on Layer2. This should be the Waterdrops layer
Leave the Blend mode of the Waterdrops layer at Normal and move the opacity slider to 50%. This will make the water look more realistic.
Then apply some sharpness using Adjust > Sharpness > Unsharp Mask. Keep the default values and click OK.

Save the image titled Droplets as a  .psp file to keep the layers in tact.
A Practical Application
As an example, open an image of a watch
Now open your Droplets file
Select the watch and paste it onto the Droplets file as a new layer
Go to the layers palette and drag the Watch layer below the water droplets layer
With the watch layer active, use the Move tool to position the watch in place beneath some water droplets

You can use the Eraser tool to remove droplets from areas where they are clumped together and  not appear natural such as the rim of this watch. To do so, make the droplets laye the active layer and the erase away any unwanted water drops.
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Below is an example of a completed image 

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Creating Realistic Water Droplets    Copyright 2003 - JMA - All Rights Reserved
Bevel WIndow Settings:

Bevel # 9
Width 1
Smoothness 10
Depth 5
Ambience 0
Shininess 80
Color White
Angle 315
Intensity 25
Elevation 40