Edit in JSFiddle

$.fn.watermark = function () {
    
    // if no support for placeholder attribute the apply jquery
    if (!Modernizr.input.placeholder) {
      
      // run the loop for each selected element
      $(this).each(function () {
       
        // set placeholder values, in input field is empty
        if ($(this).val() === '') // if field is empty
        {
            $(this).val( $(this).attr('placeholder') );
        }
       
        // focus and blur of placeholders
        $(this).focus(function()
        {
            // if the value of the input and the value of the placeholder attr is same then
            // empty the input control, and remove the placeholder class.
            if ($(this).val() === $(this).attr('placeholder'))
            {
                $(this).val('');
                $(this).removeClass('placeholder');  // ready for typing in.
            }
        }).blur(function()
        {
            // if the input value is empty or same as placeholder value
            if ($(this).val() === '' || $(this).val() === $(this).attr('placeholder'))
            {
                // set the inpu tvalue as placeholder attribute value and add the 
                // placeholder class to the input.
                $(this).val($(this).attr('placeholder'));
                $(this).addClass('placeholder');
            }
        });
 
        // remove placeholders on submit
        $('[placeholder]').closest('form').submit(function()
        {
            $(this).find('[placeholder]').each(function()
            {
                if ($(this).val() == $(this).attr('placeholder'))
                {
                    $(this).val('');
                }
            });
        });
        return this;  // for chaining
    });
    return this; // chaining
  }
};

$(".placeholder").watermark();

<div id="result"></div>
<form class="form">
    <ul>
        <li>
            <label>Name</label>
            <input class="placeholder" placeholder="Enter your full name." type="text" />
        </li>
        <li>
            <label>Email</label>
            <input class="placeholder" placeholder="Enter your email address." type="text" />
        </li>
        <li>
            <label>Message</label>
            <textarea class="placeholder" placeholder="Let us know what you think."></textarea>
        </li>
        <li>
            <input value="Submit" type="submit" />
        </li>
    </ul>
</form>

article, aside, figure, footer, header, hgroup, 
  menu, nav, section { display: block; }

.placeholder {
    color: lightgray;
}
.form ul {
    list-style: none;
}
.form label {
    display: block;
    font-weight: bold;
}
.form input[type=text] {
    width: 500px;
}
.form textarea {
    width: 500px;
    height: 100px;
}