In a medium saucepan, combine the milk, water and sugar over medium heat. Whisk until the sugar is dissolved. Increase heat to medium-high and bring the mixture to a simmer. Remove the pan from the heat and add the chocolate. Let it sit for a few seconds, then blend it with a hand-held immersion blender. Or for individual cups, divide the chocolate among the cups and pour the warm milk overtop. Whiz with one of those little frothers to make it very smooth and foamy.