Cook bacon on medium heat until crisp in a large skillet. Remove bacon and allow to drain and cool on paper towels. Leave bacon fat in skillet.
Season chicken breasts with salt and pepper on both sides. Brown chicken in bacon fat over med. high heat, turning once halfway through cooking. When chicken is no longer pink, transfer to plate and pour off all but two tablespoons of fat from skillet.
Add shallots to skillet over med. low heat. Cover and stir occasionally until light golden color. Remove lid and cook a few minutes more until they are a deep golden color. Stir often to keep them from sticking and burning.
Add garlic to skillet along with 1 cup of water. Bring to a boil while stirring for about a minute.
Place chicken back into skillet, turning to coat with the liquid. Cover skillet and simmer for about 30 minutes.
While waiting, put bacon slices in a ziplock bag and crush with your hands into big bacon bits.
Remove chicken from skillet and arrange on a serving dish. Add vinegar to skillet and bring to a boil to reduce the sauce, stirring and mashing the garlic. Add more pepper to taste.
Pour sauce over chicken and garnish with bacon bits.