The hostel has a wonderful atmosphere--there were always people in the lounge and kitchen looking to chat. The staff is incredibly friendly and helpful and the place is very clean. Free coffee and tea all day is great, and I like the "no shoes" rule--it really contributes to the homey feeling of being there. I found that the shower on the top floor did not have very good water pressure and was not too hot, so you may want to try a different floor's shower.
Our apartment was huge, very clean, and tastefully decorated. The kitchen was stocked with all the utensils you would need to cook and eat in the apartment if you wanted. If you are staying in Budapest for more than a day or two, I would highly recommend Pal's, although it was also a nice break from traditional hostels for the one night my group was in town.
This is sort of a hostel/hotel combination, so it does not have the atmosphere of some other hostels, but it is a clean, safe place to stay, and the free breakfast is great!! Note that they advertise here that they have the lowest rate (37 Euro) for the Sound of Music tour, but this is not the case. You pay 40 Euro, same as if you booked directly from Panorama tours. Panorama does pick you up at Jufa though, which is nice.
The location is perfect-- on a quiet side street about two blocks from the Haptbahnof train/metro station. A five minute walk in the other direction puts you in Marienplatz. You get a great city map at the desk and the staff is incredibly helpful. Our room was spacious and very clean. I didn't go to the bar, but the drinks were cheap and it seemed quite lively at night.