Baños: spa on a budget
Baños is a great place to unwind. The scenery is gorgeous, the slightly lower altitude allows you to finally breathe easy and provides slightly warmer temps, and of course, there are the famous thermal baths.
In town, there is the Piscina el Virgen baths. These are more easily reached and thus more popular. There is a waterfall that runs into the showers (ice-cold), and the big pool is pretty hot.
But you haven't experienced hot until you visit El Salado a little bit out of town. Take a bus from Baños for $0.20 and it should be the last stop. El Salado has five pools, one a normal chlorine swimming pool, one a kid's pool, one a large swimming pool size and quite warm, and then two amazingly steamy, hot small pools.
Admission to both El Virgen and El Salado is $1, and you can stay as long as you'd like. If you go early, you will share the baths almost entirely with Ecuadorian tourists. It makes for good people-watching.
I recommend getting a massage in Baños as well. It's a bit of a splurge, but probably significantly cheaper than in your hometown. Stay in Touch charges $20/hour with a choice between two masseurs. I chose Edith, who was wonderful. She speaks English.
When you're done relaxing (or want to work yourself up before a soak in the pools), there are many lovely hikes to choose from around Baños. I did the most obvious one, Bellavista.
The path starts just south of town and is easy to find. It's a popular hike with locals as well, and I found myself accompanied by hordes of children who came here after school. It's steep in parts, with a gorgeous view of the town from the top. There are many friendly locals along the way, and a cafe at the top to rest in.
Another fun diversion is watching the making of melocha candy. This toffee is stretched out in doorways throughout Baños (but most shops are near the bus station) and then formed into various shapes and designs. Watching people throw it over a large nail in the doorway, stretch it out, and loop it over again is pretty entertaining.
There is one particular stall where one employee is happy to give out free samples. It tastes even better fresh and soft. He gave me a deal when I bought as well, cheerfully saying it was because he liked me, and was happy to pose for a photo.
Baños is not cheap. All the Internet cafés have agreed to charge $2 per hour (as opposed to $0.60 in Quito), so it doesn't really matter which one you hit. Food tends to be a bit pricier as well. And while hotels are priced somewhat competitively, they are not compelled to bargain because there are plenty of other tourists coming in.
I was lucky enough to discover TJ's because it happened to be on the same block at Hospedaje Santa Cruz. It was easily the best deal in town, and in touristy Baños it can be hard to find deals.
Breakfast costs $1.80. This included eggs, fresh homemade bread, hash browns, fresh juice, and tea or coffee. The juice was almost always mora, and a generous size. This is already cheaper than many places in town. But as an extra bonus, they have Internet computers, which you can use for free until the food arrives. It may only be 10 minutes, but it's enough to see if you have any important messages. The food is really tasty and well-prepared as well. Service was quick but not unfriendly.
Baños is the most touristy place I visited in Ecuador, but a really pleasant way to wile away a few days.