Place the water in a small bowl and sprinkle the gelatin over the top. Stir to distribute, and set aside to soften 2 to 3 minutes.
Get out your dishes that you will be pouring the panna cotta in and set aside. Half-fill a large bowl with ice and add enough water to make an ice bath and set aside.
In a small saucepan, combine the cream, milk and sugar and bring to a simmer over medium heat. Remove from heat, and whisk in the softened gelatin and the vanilla extract.
Set the saucepan in the ice bath (making sure the top of the saucepan is well above the surface of the water), and whisk until the mixture is lukewarm.
Pour mixture into ramekins and chill at least 4 hours or overnight. If you’re going to keep them longer than overnight, cover them with plastic wrap, pressing the wrap gently against the panna cotta to prevent a skin from forming.