Shattered

This is the one I've been waiting for since Talkville began! Shattered may not be the most monumental Smallville episode, but it's peak Smallville quality-wise: Ken Biller's script is slick and pulsating, his direction (especially that amazing one shot at the Luthor Mansion) captures Lex's deteriorating mental state brilliantly, the montage at the end is chilling (as is Johnny Cash's "Hurt") and Michael Rosenbaum delivers THE defining performance of his career and the show as a whole, IMO. How Michael didn't win an Emmy for Shattered I'll never know.
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