The magician forms a cone from a piece of newspaper and pours a jug of milk into it. The newspaper is unrolled, and the milk is gone!
Several thicknesses of newspaper are used. When rolled up together, there is more than enough paper to absorb a surprising quantity of milk. The magician just has to be careful to treat the milk-filled newspaper as if it were a normal, light piece of paper when it is unrolled. It's also a good idea to have a plastic bag or something to put the paper in afterwards, since it will soon begin to disintegrate into a disgusting, milky pulp.
Note: The old "Gasoline into Flaming Newspaper" variation of this effect, made famous by Kenton "Firefly" Burns just before his sudden retirement, is no longer considered safe enough for performance.