It is possible for dogs to digest bacon, but its high fat content is very unhealthy for them. Fatty bacon and bacon grease can give a dog diarrhea or even a serious condition known as pancreatitis.
Dogs are designed to handle eating protein, and while bacon is meaty, it is so high in fat it can cause digestive upset if consumed in quantity. Vomiting and diarrhea can swiftly result if a dog is given too much bacon to eat. In addition, the more serious illness of pancreatitis can result.
Pancreatitis is inflammation of the pancreas, an organ that secretes digestive enzymes. When the pancreas prematurely release these enzymes, instead of digesting the dog's stomach contents, the enzymes attack the pancreas itself. Pancreatitis, both acute and chronic, is associated with the consumption of fatty foods, especially if the dog is inactive or does not get enough protein.
Fatty meats like bacon should be avoided as a preventative measure. Bacon, if given at all, should be used as a treat, and feeding pure bacon grease in any amount is not recommended.