THE KING OF FIGHTERS '98 / SNK / Arcade
It's my opinion that King of Fighters '98 is not only the best game in the King of Fighters series, it's also possibly the best overall fighting game of all time.
This game hits almost every point perfectly. It has a slick, colorful and appealing presentation without sacrificing substance. It has a huge roster of characters with very little filler, and fantastic character design. It has great art and animation, with detailed backgrounds that change throughout all five potential rounds of each fight. It has a kickass soundtrack. It's remarkably well balanced and free of cheapness. And it uses an elegant fighting system that has great depth without being overly complicated or confusing, or relying on joystick-breaking manuevers that only the legendary Asian Kid With His Hat On Backwards could possibly pull off.
The game is conceived as a "Dream Bout", and is non-canonical to the overall King of Fighters story, thus allowing the designers to bring back nearly every character that has ever appeared in these games (the only really noteworthy absentees are Geese Howard, Wolfgang Krauser and Mr. Big). There's remarkably few redundant characters; Shingo is the only true clone on the roster of 38, and while there are a handful that look and play in a markedly similar way (Ralf and Clark, Vice and Mature) the rest are very unique and have a broad range of strengths, weaknesses and fighting styles.
The only real points on which it can be criticized is that the final boss is just about impossible to beat (unless you lose once and then get the "enemy life to 1/3" bonus when you continue, making it only somewhat less hard), and that the endings are kind of weak since there's no real story to this one. Those are very minor points though, considering all the other things you get, and further considering that this is a game that doesn't ever even really need to be finished anyway.
In short, the game is just too awesome. They're actually due to release a remake of it in Japan (and presumably Korea, since the game has a gigantic following there) pretty soon; we'll see how that turns out, but this original version is solid fighting fun that's still great to play ten years later.
* Gameplay Video