Here is the simplest solution:
<Grid>
<Label Content="Placeholder text" VerticalAlignment="Center" Margin="10">
<Label.Style>
<Style TargetType="Label">
<Setter Property="Foreground" Value="Transparent"/>
<Style.Triggers>
<DataTrigger Binding="{Binding Expression}" Value="">
<Setter Property="Foreground" Value="Gray"/>
</DataTrigger>
</Style.Triggers>
</Style>
</Label.Style>
</Label>
<TextBox HorizontalAlignment="Stretch" Margin="5" Background="Transparent"
Text="{Binding Expression, UpdateSourceTrigger=PropertyChanged}" VerticalAlignment="Center" Padding="5">
</TextBox>
</Grid>
This is a textbox with transparent backgound overlaying a label. The label's gray text is turned transparent by a data trigger that fires whenever the bound text is something other than empty string.