Vato (sometime spelled Bato) is a Mexican slang which stands for "Dude, Homeboy, guy, etc..." This slang is widely used by Chicanos (Mexican-Americans) to refer to one another.
Vato History
According to the Chicano poet Luis Alberto Urrea, the word originated in Pachuco slang of the 1940s, and is derived from "the once-common friendly insult chivato, or goat. It had a slightly unacceptable air to it, which the Locos and Weesas of the Chuco world enjoyed. They were able to take the sting out of racism by calling themselves a bunch of names assimilated 'good Mexicans' didn't like."