In a medium pot set over medium heat, combine milk, 1 cup water, macaroni, salt, and pepper. Bring to a low simmer, stirring frequently to prevent the macaroni from clumping and the milk from boiling over. Once the mixture simmers, reduce heat to low (it should continue simmering) and stir continuously until pasta is done to your liking, about 8 to 10 minutes. The macaroni will absorb the liquid while cooking, so stir in additional water as needed, 1/4 cup at a time.
Once pasta is done and the sauce is creamy, remove the pot from the heat and gradually stir in the grated cheddar, 1/3 cup at a time, until smooth and melted. Taste and add more salt and/or pepper, if necessary. You may also stir in garlic powder and/or dry mustard at this point for extra flavor, if desired. Serve immediately.
If using low-fat or skim milk instead of whole milk, you will probably want to adjust the proportions of this recipe to use more milk and less water (see post for a more detailed explanation).
Using small elbow macaroni is recommended for this recipe. Another shape or size of pasta may require you to adjust the cooking time, which may also affect how much liquid you need to use by the time the pasta is cooked.
Extra-sharp cheddar will give this mac & cheese more flavor than mild cheddar, but feel free to use your favorite cheese(s). Freshly grated cheese is recommended for smooth melting.
To prevent your cheese from clumping up, be sure to add it after the pot has been removed from the heat. Also, do not dump in all of the cheese at once...stir it in gradually, making sure each batch is fully melted before adding more.