Stayed here for a week or so in and around my trip to Machu Pichu. The staff were very friendly and helpful and let me change nights of booking with no problems. Breakfast the usual bread and jam affair - get there early to avoid missing out. All the rooms had individuals lockers but their location, off a central courtyard, meant sleep was often elusive. Not really a problem - it is advertised as a party hostel after all...but with alot of people staying there before 4am Machu Pichu starts perhaps some quieter options may also be good.
Hot water apparently available but despite following all instructions,and even with staff help, it eluded me....others got it though so I think I am just jinxed ;)
On site tour agency which books tickets, trips and other hostels. Not recommended. My tickets were never delivered for bus journey, not for hostels and tours I booked in Puno. Nothing was explained to me and I wasted a lot of time trying to sort out the mess. Simpler to go alone.

I was running out of money so I choose the cheapest hostel I could find in Cusco for my last night there. I wasn't expecting much but I got surprised when I came there as it was a good hostel, fun (a nice and cool bar where you can meet other travelers), good located (2 blocks from 'Plaza de Armas'), and definetly, a good value for your money. Besides that, showers have hot water (may seem pointless posting this information but not all the hostels offer that!!), breakfast is included in the cheap price and
I think they have other hostels in the same city, depending on the type of journey travelers are looking for.

I recommend Pirwa Hostel.

Our room was a double, right off the courtyard.
It was dark with no external windows and incredibly musty.
It was also very cold.
The noise was unbelievable. Noise from the bar upstairs would travel down, and people in the courtyard right outside drinking till after 1am meant sleep was hard to come by. We stayed there the night before the Inca trail which meant we had less than 4 hours sleep.
The toilet off the main courtyard randomly ran out of water, the showers were more often than not cold or lukewarm. How disappointing.
The free breakfast was adequate, bread and jam and fruit.
The shared bathrooms were pretty yuck.
This is definitely a 'budget backpackers' and i would never stayed here again and never recommend it.
The travel desk guy was not helpful at all.
But the laundry service was good.

We stayed at Pirwa during a unique time, since I'm pretty sure we were the only guests staying at the hostel during the train strike, but it was still a great place. The location is awesome (between the Plaza de Armas and the hot springs), but the hotel itself was peaceful, the beds were almost criminally comfortable and warm, there was always hot water (which admittedly might have been a bi-product of us being the only guests at the time), and the staff was helpful and friendly, never hesitating to give us a restaurant recommendation or some more clean towels. It admittedly may have been the circumstances, but Pirwa was truly a dream hostel.