Inside the potato are little pockets of things called phenols, which are essentially an acidic chemical compound. These phenols are surrounded by enzymes (proteins), and everything is held together inside the potato cell.

When you cut into the potato, you damage the cell walls that keep everything nice and tidy. The phenols and the enzymes meet the oxygen coming in from the outside world, causing a chemical reaction to take place. This chemical reaction results in - you guessed it - pink potatoes. This discoloration isn't harmful to us and you can still eat those potatoes

I always recommend slicing the potatoes and immediately putting into a bowl of water with some acidity added such as concentrated lemon juice or white wine vinegar, often this will reduce the discoloration due to expose to air. A teaspoon per gallon of water works, and isn’t enough to flavor the potato once drained, patted dry and used in a recipe such as scalloped potatoes or latkes.

Dutch Oven Scalloped Idaho® Potatoes