Before you can answer what is the best exercise to develop the lats (latissimus dorsi muscle), you must first determine whether it is the upper or the lower portion of the muscle that you wish to target. No one exercise hits both sections equally in one exercise.
For example, a wide-grip pull-up or pull-down is best suited for development of the upper portion of the lats, the section that produces “wings”. A narrow or neutral grip is best suited for development of the lower portion of the lats.
Some exercises can hit both sections but not maximally. For example, the cable row with a neutral grip is most effective for the lower lats, but if you pull the elbows to the rear so that they go beyond the level of the back, you will also have fairly strong involvement of the upper latissimus.
A similar effect can be received when doing the bent-over dumbbell row keeping the elbow alongside the body and bringing it to the rear as far as possible. If you use a pronated grip in the seated row or the bent-over dumbbell row and keep the elbow out to the side of the body, then you will target mainly the upper portion.
This occurs when you use a horizontal pulling action rather than a pulling down action from overhead. This latter action is most conducive to development of the upper portion and producing the wings effect.
See Kinesiology of Exercise for more details. In his book you will also learn of other exercises that are beneficial in producing full development of latissimus dorsi and the other muscles that are simultaneously involved in the above exercises.