Prepare: Soak wood chips for 30 minutes in water or according to package directions.
Your grill will have two zones, one side will be for the hot coals, and the other will be a space for the drip pan.
Heat charcoal using your preferred method and pile hot coals to one side of the grill.
Carefully place an aluminum drip pan on the opposite side and fill halfway with tap water.
Place soaked wood chunks on top of the hot coals.
Replace the grill grate and add bacon strips directly over the drip pan.
Place cream cheese on the grill over indirect heat.
Close the lid making sure the air vents are on facing the opposite side as the coals - this will ensure a full circulation of the smoke.
Cook bacon for 10 minutes per side or until desired crispiness.
Remove bacon from the grill and, when cool to the touch, rough-chop and chop jalapeño. Set aside with the shredded cheese.
Allow the cream cheese to smoke for another 40 minutes.
Sprinkle toppings directly on cream cheese and allow to cook an additional 3 minutes or until the cheese is melted.
Let your dip rest for about 5 minutes to cool and enjoy.