The most atmospheric location in Prague has to be the Old Town Sqaure (Staromestske namesti) by night. It was here in 1968 that the tanks rolled in, signalling the end of the "Prague Spring", and were received with Molotov cocktails and general indignation. On a good night in 1997, the square is humming; street jazz in one corner, the local youths singing and drinking on the steps of the Jan Hus Memorial in another, and cafes everywhere. What makes the square spectacular is what surrounds it: the tall pastel facades of elegant townhouses which form the square are dwarfed by the Gothic extremes of buildings such as the gigantuan Tyn Church behind. As in most of Prague, the food and beer is excellent and nearly free, and one feels (at least) pretty safe. Why can't Leicester Square in London be more like this?
Not to be missed by day is the tower of the Town Hall of the Old Town (Staromestska radnice), the astronomical clock, and best of all, the food at the street restaurant next to it which is superb. (Go on - try the salmon and caviar starter; this is Prague so you can afford it!)
Don't go near Wencelas Square, on a weekday at least, which appears to be Prague's attempt at Western-style unpleasantness. Traffic, overcrowding, grimy resturants and tourist traps abound.