The Plaza de Armas is a great central location of Cuzco's historic center. The streets that fan out from there are host to quaint back alleys, cool eateries, colonial-styled hotels, and a lot of tour agencies.
On sunny days, the plaza is an awesome spot to sit and watch people walk by. Yet, be mindful of the legion of kids selling souvenirs. As adorable as they may seem, their marketing skills are keen, they're beyond persistent, and some of them even know a few words in other languages--like Japanese, French, and German.