From Windows Wallpaper Wiki

Not to be confused with Water Color, a wallpaper included in Windows 2000 and Me.

Image information
Originates fromMicrosoft
Windows information
SoftwareWhistler (builds 2267-2419)
File typeJPEG (.jpg)

Watercolor is the default wallpaper of Whistler builds 2410 to 2419, although first added by build 2267 but not set as the default wallpaper. It is an abstract wallpaper featuring light colours, along with faint blurry text reading "whistler" at the top. It is unknown specifically who made it, but most likely to have been Microsoft themselves. The wallpaper shares the same name as Whistler's Watercolor visual style, the default visual style between builds 2257 and 2419. It was removed in build 2423, with the default wallpaper being changed to Red moon desert.