The Chelsea International is one of the most popular backpacker joints in New York City. Located close to the heart of downtown Manhattan, it's the most expensive hostel I've ever stayed at (and really, it's nothing special), although it's about as cheap a place as you can get on this island. The only real bells and whistles that they have here are: a kitchen that all guests are free to use; and a nice grassy area and a set of tables, out in the backyard. Their other services — e.g. Internet, laundry, food, airport pickups — all cost extra. It's not the most amazing hostel I've ever stayed at; but it's got a nice mixed crowd of backpackers, and it's fairly good value for New York.
Rooms: neat and clean, and with reasonable space — but fairly plain.
People: a mix of American kids from interstate, and international backpackers — nice crowd.
Staff: reasonably professional, and always available — although they're just doing their job, they're not going to go out of their way for you.
Location: near 7th Ave and 20th St — if you know Manhattan, that's fairly downtown, and in a semi-quiet area. Of course, it doesn't matter where you are on Manhattan: as long as you're on the island, you're near everything.
Food / Internet: none. Kitchen available, though.
Hot water: what do you think this is, South America or something? Of course they have hot water! :P