Brown bacon in large cast iron skillet or your favorite pan until the bacon is brown but not super crunch. You want the bacon cooked and browned, but you don't want there to be bacon rocks in your potato salad.
Remove the bacon and remove all but 2 tbsp. of the bacon fat.
Add the onion and saute the onions until translucent.
In a large mixing bowl, add the vinegar, water, suger, salt, and black pepper.
Whisk ingredients together.
Add the onion, cooked bacon, and remaining bacon fat to the mixing bowl.
Peel the potatoes, cut in half, and then cut the halves into 1/4 inch thick pieces
Place the potatoes in a pot of cold water and bring to a simmer. Cook the potatoes until they split when pierced with a knife or fork. You don't want these potato chunks to be mushy. You want firm potatoes.
Drain the potatoes and add the potatoes to the large mixing bowl.
Carefully mix the potatoes. You don't want to mash them. I like to stir, then let the salad sit for a minute, then mix again. I'll repeat this process several times. As the potatoes release some starch that is picked up by the dressing, the dressing will thicken and coat the potatoes more evenly.
Serve hot or cold. I prefer mine on the warm side.