Line baking sheet with buttered waxed paper; set aside.
Melt caramels, marshmallows and water in medium saucepan. Cook over medium heat, stirring constantly, until caramels melt.
Cool slightly while preparing apples. Rinse and dry apples. Insert skewers into apples.
Dip each apple in caramel mixture, coating apples. Place on prepared sheet. Refrigerate until firm.