1. In a medium saucepan, heat the milk and heavy cream over low heat, stirring occasionally.
2. Once warm, add the chocolate chips and stir constantly until they melt and the mixture becomes smooth and creamy.
3. Stir in the vanilla extract and peppermint extract (if using) to add depth to the flavor.
4. Continue heating until the hot chocolate reaches your desired temperature, being careful not to let it boil.

Garnishing:

1. Pour the hot chocolate into festive mugs.
2. Top with a generous swirl of whipped cream, mini marshmallows, and a sprinkle of crushed candy canes or red and green sprinkles.
3. Dust with chocolate shavings and a touch of edible glitter or red sugar for extra holiday magic.