Choose unflavored gelatin for your panna cotta -- the most common in the U.S. is granulated, but gelatin's also sold in sheets -- and make sure you "bloom" it before adding it to your cream mixture. Blooming gelatin basically means you're dissolving it, and allowing it to absorb liquid. The blooming process is pretty easy -- just sprinkle the gelatin over cool water or milk. Keeping the temperature cooler than 130 degrees Fahrenheit (54 degrees Celsius) will keep gelatin from blooming too quickly, and in doing so you'll avoid lumps in your final product. After sprinkling, give it a gentle stir to make sure you have even distribution, and let it sit for a few minutes (usually about 5 minutes will do the trick).
In addition to blooming, straining the final mixture just before you pour it into molds to set will give your panna cotta the smoothest texture.
Gelatin-based desserts are best eaten soon after they're cooked, and panna cotta will begin to develop a rubbery texture if it ages beyond four days.