Chicken smothered with onions, or pollo encebollado, is a popular homestyle dish throughout Central America. It's an incredibly easy dish to make and full of flavor. This is found on most Central American restaurant menus.
Season the chicken pieces with salt and pepper. Heat the oil in a large sauté pan or pot over medium-high flame.
Working in batches, brown the chicken pieces in the hot oil and remove to a plate.
Pour off all but 2-3 tablespoons of oil and add the onions to the same pan. Reduce heat to medium-low and sauté until cooked down and just beginning to brown, 10-15 minutes.
Increase heat to medium-high and return the chicken pieces to the pot. Add the water or stock, wine, bay leaf, salt and pepper and bring to a boil. Reduce heat to low and simmer, covered, for 25-35 minutes, or until the chicken is cooked through and tender.