While I do really enjoy the hats, from a game design standpoint I have to favor transformations. They allow the designers to really show their creativity with level design, and how Wario interacts with enemies.
Transformations really set Wario apart from Mario. That coupled with Wario being invincible makes Wario really stand out. Attacking him only makes him stronger!
Transformations have made it so you have a much more interesting way to figure out puzzles or traverse hidden areas.
Example being vampire wario making you fly and reach areas you wouldn't be able to do with just wario alone. Plus each transformation was pretty comical as well, since most of the time wario seemed displeased with his life choices. Being burnt, being a zombie, or a snowball it was quite amusing.
I'll always love the hats, they are classic, but I gotta go with transformations as the best. They're hilarious, and the gameplay built around them is extremely clever.