When I talk about traveling with people, they are often amazed that I stay in hostels sometimes, and even worse, I rent a bunk in a room full of strangers instead of a private room at hostel. Don't get me wrong, there are some negative aspects about some hostels, but the same can be said about many hotels.
I want to make a list of the pros and cons, and maybe if you read this you can decide for yourself.
Pros
Price: Hostels are very cheap. In most large Western European cities, a bunk in a hostel will go for between $20-40.
Use of kitchen: Many hostels have a kitchen that is open for the guests to use. If you are like me, this will be a large benefit. I like to prepare most of my food myself.
People: This is on the Pros, and Cons. It all depends on the people you meet. Some are great,I have developed lifelong bonds with random people that shared the same hostel.
Guides: Many hostels offer tours, guides, or at the least the staff knowledgeable about the area. If you do go on a "free" tour, just remember that most guides work for tips, so if you enjoy it show gratuity.
Laundry: When traveling for extended periods of time, you run out of clean clothes quickly. The prices to get clothes washed through the hotel can be outrageous, sometimes it is cheaper to just buy new clothes. Many hostels have coin operated laundry facilities, or even free sometimes. If not, the clerk can almost definitely direct you to a local coin operated wash. In Berlin the machine was broken where I was staying, they directed me to a place in walking distance called the "Schnell & Sauber Waschsalon", if you are ever in Mitte, Berlin and need your clothes washed I definately recommend this place. You can drink good beer while you wait.
googlemaps streetview
Cons
People: This is on the Pros, and Cons. It all depends on the people you meet, and luck. But the good thing is, hostels are cheap enough that if you decide to just leave without a refund and find somewhere new, it will not break your bank.
Cleanliness: Even the nicest hostels I've seen are on the lower level of cleanliness. With such a large turnover, maybe its difficult to keep up to my standards?
Personal space/ privacy: When you share a room with up to 19 other people, you do not get much personal space or privacy. I would sometimes rent a private room after several nights in a shared room, just to get a day of privacy.
Advice
If possible, always check the reviews of the place before booking. Hostelworld.com, hotels.com, and expedia.com all have listings for hostels, the reviews can be very helpful.
Don't be scared of meeting new people and stepping out of your comfort zone.