Start by getting the potatoes cooking. Add the diced potatoes to a large pot and cover with cold water by an inch or two. Bring to a boil and cook just until fork-tender—about 10 minutes. You want them cooked through, but not falling apart. Drain and set aside while you build the rest of the dish.

While the potatoes cook, place the bacon in a wide skillet over medium-high heat. Cook until the fat renders and the bacon turns crisp, flipping as needed. Transfer the bacon to a paper towel–lined plate and crumble once it’s cool enough to handle. Leave the rendered bacon fat in the pan—this is where the flavor starts.

Lower the heat to medium and add the diced onion directly to the bacon fat. Cook until softened and lightly browned, about 6–8 minutes. Take your time here; the onion should be fragrant and golden, not rushed.

Add the vinegar, water, sugar, salt, and pepper to the skillet. Bring the mixture to a gentle boil, stirring to dissolve the sugar and pull up any browned bits from the pan. This hot, tangy dressing is what defines a true German-style potato salad.

Add the cooked potatoes and about half of the crumbled bacon to the skillet. Gently fold everything together and cook just long enough for the potatoes to soak up the dressing and warm through—about 3–4 minutes.

Transfer the potato salad to a serving dish. Finish with the remaining bacon and a sprinkle of fresh parsley. Serve warm.