Remove a small slice from both stem and root end of each pearl onion and peel them. An alternate way is to parboil them for 2 minutes, drain and plunge into ice water to stop the cooking process. Pop the skins off by pressing the onion at its root end.
Set the onions in a saucepan wide enough to accommodate them in one layer and barely cover them with water. Boil over high heat for 10 minutes until partially cooked. Add the butter and sugar and continue to boil until the water has evaporated and the onions begin to sizzle.
Reduce the heat to medium low and shake the saucepan and turn the onions in the butter and sugar to brown them. Continue to cook until the onions are glazed, brown and syrupy looking. Add a tablespoonful or more of balsamic vinegar and cook until evaporated. Season well with salt and pepper.