El Molino
Most tourists who come to Cusco do their shopping at only a few central places, such as Gato's Market, Mercado Central, Mercado San Pedro (for the slightly more adventurous), and the shops in or near the Plaza De Armas. But if you stay in Cusco for a while, the locals will soon inform you that the only real place to shop is at El Molino. It's not in Lonely Planet (not in mine, at least — ostensibly too far away and too dangerous). It's not near the city centre. But it has everything you could possibly need, from shoes to DVDs, and from seafood to sunglasses. And all at rock-bottom prices. El Molino is the black market of Cusco.
I've been to El Molino about 5 times now, mainly for DVDs (pirated, naturally — that's all they have in Peru). It's a bit of a pain to get to, so the easiest way to get there and back is via taxi (s/2 each way). There are also some combis that go between there, and central places such as Av. El Sol.
El Molino may be a black market, but it's so established and (seemingly) so civilised, that it feels more like a shopping mall than a bazaar. The whole place is undercover. Every man and his dog is there, from trendy young couples to hunchbacked Quechuan women, and from groups of teenagers to clans of extended families (with the odd gringo or two around as well). Behind every second stall lies hordes of fashionable clothing, and behind every other stall stands a hip-hop young assistant, playing pop music and American movies at top volume. All it needs is air-conditioning, security guards, and world-class toilets, and you'd think you're in Westfield.
Despite the appearances, however, one shouldn't forget that El Molino is an illegal market, and that everything there is contraband. Some of it is stolen merchandise. A fair bit of it is produced in local "rogue factories", that produce brand-name goods (such as running shoes) illegally. And quite a lot of it is also smuggled into the country, from neighbouring states (in particular, from Bolivia and Paraguay). But, hey: it's where (and how) the locals shop, and it's all dirt cheap. So who cares?