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In a large skillet, fry bacon until crisp; remove bacon to paper towels to drain. (If there's an excessive amount of bacon grease, you can pour off half if desired).
To the bacon grease, add cabbage, onion, sugar, salt and pepper; saute over medium heat for 3 to 4 minutes.
Add water and bacon; cover with a lid and reduce heat to medium-low.
Cook for 20 minutes, stirring occasionally or until cabbage is very tender.
If there's water left in the bottom of the pan after 20 minutes, remove lid and increase heat until remaining liquid is cooked off.