Warning: Aguas Calientes is in the nastiest tradition of tourist towns. Be prepared for inflated prices, incorrectly calculated bills, and all the rest. A common ploy is to have a 15 sol menu del dia. When your bill is brought, suddenly it is 10-15% more than advertised due to the "tax" and "servicio". This is fairly easy to avoid if you are aware of it - when the tout is inviting you into the restaurant, he or she will name a price. Agree the price with them, and say, "No tax, no servicio, no nada mas." When they bring the bill, you often have to remind them of this agreement, but there is usually no problem if it is agreed up front. The waiter will tell you he earns no wages, and the service charge is his only pay. It is a lie. Only ever pay what is advertised.
The town is full of pizza restaurants, which are a safe option. Menu Hoy or Todays Menu is usually S/.10.00 - S/.15.00 and depending on where you go will be something along the lines of -
Palta Rellena Stuffed AvocadoSoup Main Course generally trout, beef or chickenTea, Coffee, Fruit Juice, Wine or Pisco Sour
Alpaca is definitely worth trying if you get the chance, in my opinion it tastes better than beef or lamb.
The smaller restaurants up the hill will often offer twice the food at half the price than the larger establishments, and the quality is usually the same.
Indio Feliz Happy Indian is a nice French restaurant for those willing to spend a bit more than at the other places. Meals will cost about 30 soles here plus drinks but the food is outstanding. There is a also a 50-soles prix fixe menu that provides three courses is good value. The restaurant is owned by a Frenchman and his Peruvian wife, who are both very friendly.
Every restaurant has an advertising guy whom will give you a business card and their name - it can get quite annoying as there are many restaurants who will try to lure you into their establishment. The ad man will take you to the bar/restaurant and seat you and for this they'll get a 10% tax added to your final bill and then if the service was good you'll want to tip the normal 10% of the bill. You'll end up tipping 20%. One could see it as creating jobs... yet annoying. See solution for it above - agree "no tax, no servicio, no nada mas" when the price is quoted, before sitting down.
There are Chifas, the Peruvian version of Chinese restaurants, everywhere and make good options after a day of hiking.
There are two cafes outside the entrance to Machu Picchu that have decent cafe-style food and are surprisingly reasonable.
