Because of an increasing number of security cameras, it is crucial to establish a system that protects the privacy of objects in the recorded images. To this end, we propose a framework of image processing and data hiding for security monitoring and privacy protection. First, we state the requirements of the proposed monitoring systems and suggest possible implementation that satisfies those requirements. The underlying concept of our proposed framework is as follows: (1) in the recorded images, the objects whose privacy should be protected are deteriorated by appropriate image processing; (2) the original objects are encrypted and watermarked into the output image, which is encoded using an image compression standard; (3) real-time processing is performed such that no future frame is required to generate on output bitstream. It should be noted that in this framework, anyone can observe the decoded image that includes the deteriorated objects that are unrecognizable or invisible. On the other hand, for crime investigation, this system allows a limited number of users to observe the original objects by using a special viewer that decrypts and decodes the watermarked objects with a decoding password. Moreover, the special viewer allows us to select the objects to be decoded and displayed. We provide an implementation example, experimental results, and performance evaluations to support our proposed framework.