Pour sweetened condensed milk into a pan. Cover with foil. Place that pan into a larger shallow pan. Fill larger pan with water to about 1/2 inch up the side of the pan.
Bake for 1 1/2 to 2 hours or until caramel is thick and dark. Remove from oven. Remove from pan of water and allow to cool for 20 minutes before serving or using. Put caramel into a bowl and whisk until smooth.
Extra caramel can be refrigerated. Bring to room temperature before using.