I'm amazed how a big old fatty piece of bacon becomes so much smalller and crispier after being microwaved after a couple of minutes. What happens to all that fat? Is it still there just with much less water in it? Does microwaving it change the fat content?

Do you have paper towels or napkins over/under/around the bacon when you microwave it? If so, then they're probably sopping with fat when you're done. Remember that fat will also liquify at a much lower temperature than muscle tissue (which I don't think liquifies, just burns), hence you can "cook out the fat." It still has fat after it's been cooked, but I believe that it's been reduced somewhat (assuming you have a mechanism for removing it, like paper towels).