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Cuzco was the capital of the Inca empire and can be considered Peru's tourist capital today because of the rich Inca heritage. Many of the streets in the city center are lined with buildings containing whole parts of ancient Inca walls. The streets are often stepped, narrow and crowded and probably don't look that different from those in earlier days.
The heart of Cuzco is on the plaza de armas. The Avenida de Sol, leading roughly speaking south-east from the plaza is the main business street. To the north and the east of the Plaza de Armas you find the old quarters of Cuzco.
Many of the sights in Cuzco itself stem from Colonial Times, there are quite a few interesting churches and old mansions. The main Inca sights are to be found at the Coricancha - the golden courtyard. And of course Machu Picchu is close by and an ideal excursion from Cuzco.
Cuzco houses three reasonably good museums that are worth a visit.
The markets of Cuzco are great for getting Indian craftwork. The Plaza San Blas is one of the best places to see it made. The street leading up to it have a lot of shops.