Preheat oven to 350°F (175°C). Place bacon on a cookie sheet and bake until crispy. Remove and dry on paper towels. When cooled, break into small pieces or bits.
Cook caramels and water in a saucepan on low heat. Stir constantly until caramels are completely melted and has a smooth and thin consistency.
Insert wooden popsicle stick or chopstick into end of each apple. Dip apples in caramel, spooning caramel on top to help cover and coat apples. Let excess caramel drip off.
Quickly roll caramel apple in bacon bits and let cool on a sheet of parchment paper.