Combine chocolate chips and 1/4 cup water in saucepan; stir over low heat until melted and smooth.
Remove from heat and set aside.
Cream shortening and sugar; add eggs, one at a time, beating after each addition.
Blend in melted chocolate.
Add flour mixture alternately with 1 cup water.
Pour into 2 greased and floured 9" layer cake pans.
Bake 30-35 minutes at 375°.
Frost with Chocolate Velvet Frosting.