Heat all of the ingredients except for the vanilla extract to boiling in a heavy Dutch oven over medium heat, stirring constantly. Reduce heat slightly, boil for about 30 minutes, stirring frequently, until the sugar is dissolved and the mixture is caramel-colored. Stir in the vanilla.
Serve hot or warm. Store in the refrigerator for up to 2 months.
Notes
It's best to use a heavy pot for this recipe.
Be cautious with the temperature - overheating the mixture will cause the caramel to scorch and taste burnt.
Don't pull the sauce off too early once it starts turning colors. The darker the caramel, the richer the flavor will be. Be sure to keep the flame low and keep an eye on it.
For best results, pour the final Caramel Sauce out of the pan and resist scraping the bottom of the pan in case there is any crystalized sugar on the pan - which can ruin the whole batch.
Note that Caramel Sauce is very, very hot! Take caution not to get it on your skin as it can cause major burns.