Before you start, decide where you are going to keep the sauce. I use canning jars which I wash in hot soapy water. Since this is caramel and not preserves you don't have to be quite as meticulous in keeping it sterile since the high sugar content will keep most bacteria at bay. In fact, I haven't seen any of my caramel sauce grow anything, but I have seen the butter go stale.

Add the sugar to a heavy sauce pan.

Add the water and cook over medium heat until the sugar dissolves

Bring the syrup to a boil. This will cause the water to evaporate. As the water evaporates, the syrup will thicken and increase in temperature. You will notice this because the bubbles will start to get bigger and slower. Do not stir the syrup or drop any sugar crystals into it or you risk crystallizing the entire super-saturated solution.

The syrup will pass through a number of stages which are descriptions of how the solution behaves when added to cold water. As the concentration of sugar increases, it goes from thread stage to ball stage to crack (hard) stage. This picture is probably around a hard thread stage.

Around the crack stage the syrup will start to brown and caramelize creating deep flavors.

At this stage you can remove the caramel from the heat. If you let it cool until the syrup flows instead of drips off a spoon you can make some sugar art. Simply spread out some parchment paper over a cool surface (like an upside down cookie sheet) and drizzle the syrup in patterns.

Let the sugar cool and harden and then peel it from the parchment paper. Store in a dry air-tight container or it will absorb moisture from the air.

You can skip the sugar art stage or you can reheat the sugar and continue on. Make sure you have the butter and cream ready before you get to this point. Once the caramel has started to turn brown, watch it carefully so it doesn't burn. It will turn from light brown to dark brown pretty quickly.

The darker it is, the deeper the flavor, but it may become slightly bitter just before it burns. When the caramel reaches the darkness you desire, turn off the heat and pour in the cream. Stir until smooth.

Return to low heat and mix in the butter until smooth.

While hot, spoon it into the jars and seal them. Let them cool at room temperature until you hear the lids pop (meaning they've cooled and created a vaccuum seal) then store them in the fridge until you're ready to use them.