Mexican slang for "man"... there is some kind of respect implicit on this word to the
guy referred as vato. Vato is a
guy who means business.
The instance Bato instead of Vato should be more appropiate as it sounds on the streets. But grammatically, both words are correct because this word hasn't been ruled by any Language academy so
far.
Vato is not the same as güey. Güey does not implies respect. Güey is more alike to be pejorative or familiar depending the way it is applied.