In a medium saucepan over high heat, stir together water and sugar until sugar has dissolved, around 5 minutes. Remove from heat and let cool. Stir in lime juice, tequila and triple sec.
Pour mixture into a deep 13 x 9-inch baking dish. Place the baking dish into the freezer at a level spot until set, about 5 to 6 hours. Every hour, stir mixture with a fork to rake up the ice chips.
Serve in shot glasses or store in an airtight container for 1 to 2 weeks. (Ice should be frosty like a snow cone, not smooth like sorbet.)
To rim glasses, place salt or sugar on a plate. Run the edge of a lime slice around the outside rim of sherry glasses or shot glasses. Roll the outer edge of the rim in the salt until coated.