Travel to Baños, Ecuador was fairly easy from the Qutio bus terminal Quitumbre, serving travelers headed south. To be clear, there are a few different villages in Ecuador with Baños as the first word in the name. I am 
referring to Baños de Aguas Calientes, popular with local and international tourists and expats alike. Baños is an easy to maneuver, fairly quaint village seated in a valley thriving on tourism. While there appear to be a number of hostels and hotels within and around Baños, we stayed at Hostal Chimenea. The walk from the bus terminal in Baños to Hostal Chimenea is painless – only a few blocks. If it is raining (as it was when we departed) the taxi is US$1.
Per the directions posted on Hostelbookers, “From the bus station, walk 4 blocks along Calle Maldonado and turn left onto Calle Martinez. From there, you’ll find Hostal Chimenea around six blocks along on your right.” 
The directions are accurate however note that as you approach the intersection where you are to go left, you might see a sign for Hotel Chiminea. There is both a hotel and a hostal Chiminea. If asking for directions, just be sure to distinguish between the two. No biggie if you end up at the wrong one – they are not that far apart. Hostal Chimenea is across from the outdoor vendors.
We found the hostel to be clean and our stay pleasant. The location is good, only a block or a few to just about anything (parque central, restaurants, hot springs). The owner/manager was friendly and accommodating, and check-in/out was easy. Pasted below is my personal review of Hostal Chiminea, as posted on Hostelbookers.
Liked: One of the cleanest, more modern looking hostels we have stayed at. Clean hallways, and rooms, located right next to some of the hot spring bathing establishments and town square – although it is a small town. Balcony and view are nice, and management is easily accommodating. Easy walk to everything.
Disliked: Pillows were hard as bricks. One of us chose not to use a pillow and the other awoke with a headache. Bathroom window could not be closed, and the noise from the rooftop terrace, and music playing outside could not be closed out. With concrete walls and tile floors (typical of the entire region) the interior noise echoed as well. However once the terrace closed all was fine.
Click here to read what others had to say about Hostal Chimenea on Hostelbookers and TripAdvisor.