'The bee's knees' is an expression which denotes that something is desirable or the best of its kind. It originated in America in the 1920s along with a number of other two-word expressions which were constructed in similar animal/anatomy format, although there were exceptions to this format.

Some further examples :

Assorted animals :

• The elephant's adenoids
• The bullfrog's beard
• The gnat's elbows
• The monkey's eyebrows!

Felines :

• The cat's whiskers
• The cat's miaow
• The cat's pyjamas

While 'the bee's knees' is certainly slang and does indeed rhyme, it is not actually rhyming slang in the normal sense, since true rhyming slang consists of a phrase which rhymes with the word that it is substituted for, such as 'butcher's hook' for 'look'.

Source:
http://www.worldwidewords.org/qa/qa-bee1.htm

The Bee's Knees is a variant of the gimlet, in which honey is used in place of sugar syrup. It takes a bit of work to mix, but the result is a smooth gin drink in which the lime juice melds the complex sweetness of the honey and the herbal notes of the gin. This drink was likely concocted in the halcyon days of the gimlet, the Roaring Twenties, and named after the slang phrase of the time. The lemon garnish for a lime drink is purely for color, I mean, who has ever seen a green bee?

• 2 oz gin
• 1 tsp honey
• 1/2 oz lime juice (freshly squeezed)

In a separate glass, thoroughly mix the gin and honey.
Pour the resultant mixture and lime juice over crushed ice and shake.
Strain into a cocktail glass.
Garnish with a wheel of lemon.

I tend to mix this drink in pairs, doubling the ingredients, as making this cocktail takes a bit of effort. You want to make sure that the honey is thoroughly dissolved in the gin, or else the ice will catch it and become tainted.

In recent decades, as gin has fallen out of favor as a base for sweeter drinks, the Bee's Knees has been varied to a (white) rum drink. If you should order this drink at a bar watch the bartender carefully to make sure he does not begin to mix Trader Vic's Bee's Kiss (a rum and cream drink), or a Stinger (brandy and crème de menthe).

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