The Black Baron is a notorious dog-fighting champion who founded the ACES flying competition, located in Kinderdijk, Holland.
It was in Holland that the Cooper Gang first interracted with Penelope, someone that would be a very valuable asset to the Cooper Gang. The Cooper Gang entered the ACES competition themselves as a part of a deal: If they could take down the Black Baron, then Penelope would join their gang. They then began to plan their strategy to take down the Black Baron, which involved turning the competing teams against eachother.
There were many various competitng teams in that year's ACES competition. One surprising team was Team Muggshot. In Sly 3, Muggshot makes his return in an attempt to win the ACES competition. It appeared it was possibly Muggshot's trophy to lose, as he finished 2nd place the previous year. However, Bentley later provoked Muggshot to go outside of the hotel where all the pilots stayed. This broke the rules, resulting in Muggshot being disqualified and then arrested by Carmelita Fox.
Another surprise appearance was Dimitri. The Black Baron hired Dimitri to do color commentary during the ACES competition. Dimitri gives the Cooper Gang a little tip by revealing the location of the ACES flight line-up.
Eventually, Sly faces off against the Black Baron on Baron's plane in the sky during the ACES competition. After Sly defeats him, Black Baron is unmasked, and revealed to have been Penelope all along.