Step 1: Check the left-hand and right-hand limits.
For \( x \neq 2 \), the function \( f(x) = \frac{|x - 2|}{x - 2} \) is either 1 or -1 depending on whether \( x>2 \) or \( x<2 \). Step 2: Conclusion.
Since the left-hand and right-hand limits of \( f(x) \) are not equal at \( x = 2 \), the function is discontinuous at \( x = 2 \). Therefore, the correct answer is (D) \( f(x) \) is discontinuous at \( x = 2 \).