First you have to cure the bacon.
Two ways... dry cure, basically slathering it in a salt, sugar, and spice mixture and leaving it go for a week or more, or a wet, or Wiltshire, cure.
I've done both. I like the wet cure better. It's also a lot faster, and you can add things like apple cider to get even more flavor into the meat.
Then you dry the meat thoroughly using a fan. This creates a pelicle, or a layer of protein that curing has brought to the surface. It's what the smoke particles stick to.
Finally, you cool smoke (nothing over 80-90 deg. or so) for anywhere from 6 hours to a week or more.