Expand form at runtime using a template
Your code looks good, and very clean. Best practices are usually subjective; there's no absolute best way to clone and insert an element. That being said, I would make two suggestions:
1. Be consistent with your HTML
Your conditions div doesn't have quotes around its ID, whereas your template div does. I'd recommend always surrounding IDs in quotes as a standard practice.
2. Swap the .show() and .appendTo() order
This suggestion is purely subjective, but semantically, I think it makes more sense to add the cloned element to the DOM first, then change its display property, rather than change its display property first (which won't have any affect yet anyway) and then add it to the DOM. Again, that's just my opinion.
Other notes
If you're interested in adding autofocus to your input elements (so that as a new element is added, it automatically gets focus) you could do that fairly easily by inserting this line just before you close your function:
[0].childNodes[3].focus();

Also, if you ever modify your code to where you need to access the cloned elements by ID, keep in mind that your cloned elements will start with condition2.  You're using the length to generate the number, so when you add the first element the length will be 2.