recipe say's to sponge on 2 cups warm milk and 1 cup warm water, what does this mean?
"A technique of mixing dough in a two stage process to produce more
  flavorful loaves. The first stage involves mixing a small amount of
  water, flour and yeast together first and giving it some time to
  ferment. The sponge is then mixed in with the rest of the ingredient.
  
  Loaves produced this way requires shorter fermentation time, allow for
  more flexibility in timing (the sponge can be held in the fridge for
  longer time), develops a better flavor and requires less yeast."


(http://www.foodista.com/technique/CRDDPSTF/sponge-method#)

Also:


  A sponge ferment is usually a sticky process that uses part of the
  flour, part or all of the water, and part or all of the yeast of a
  total- or straight-dough formula. Highly liquid sponges of batter
  consistencies are mixed with a whip, spoon, or fork. Lower hydration,
  stiffer sponges are lightly mixed or kneaded just until the dough
  begins to develop. The sponge is allowed to rest and ferment for a
  period of time in an environment of a desired temperature and
  humidity. When the sponge's fermentation time has elapsed or it has
  reached a desired volumetric growth characteristic, the final dough's
  ingredients are added.


(http://en.wikipedia.org/wiki/Sponge_and_dough)