In the morning, I mix my protein powder in my smoothie. After I work out (in the early evening), I mix it w/water. I perfer it in the smoothie b/c it tastes better, but after the gym mixing it w/water is much easier.
It all depends on you. You can mix it any way you like. I prefer mixing it with water, so that I could save some calories. After my workout, I put some carbs into it, like a banana or something.