Squeeze enough juice from 6 to 8 of the limes to measure 3/4 cup; pour juice into medium bowl.
Add lime peel and water; mix well. Place three layers of damp cheesecloth over a medium bowl. Pour juice mixture into cheesecloth. Tie it closed and let drip into bowl until dripping stops, about 10-15 minutes. Press gently. Measure exactly 2-1/2 cups prepared juice into a 6-quart pan.
Stir sugar into the juice in the pan.
Add food coloring if desired.
Bring mixture to full rolling boil on high heat, stirring constantly.
Stir in pectin. Return to full rolling boil and boil exactly 1 minute.