Hi,
You can do it either on the server side or client side. If you do it on the server side, you will need to use a CustomColumn and the list will be the same for every cell in the column. See here for a working example:
http://demo.essentialobjects.com/Default.aspx?path=Grid\_i1\grid_custom_column_adv2Note the drop down in this sample is a DropDownList control, so it raises server event when an item is selected. This may not be what you wanted. In that case you will can in a client side <select> element. In either case you will need to work with CustomColumn so that the Grid knows how to load/save data from/to your list box.
If you always want the drop down box to appear for all rows (not just the current editing row), then you would just put raw HTLM inside each cell. For example, instead of having value "item" in your cell, you would have raw HTML such as "<select><option value='1'>item 1</option><option value='2'>item 2</option></select>" in your cell.
Hope this helps.
Thanks!