Otavalo is famous for its legendary craft market. If someone wants to buy a souvenir from Ecuador, it's the place to come. But watch out, bargaining is a must, since it's also a tourist trap.
In 2005, I visited this market and I bought several souvenirs. Fourteen years later, I see again the same items I bought at the time. Nothing has changed. There are still lots of very nice things, but space is needed to carry them.
Otavalo also has an excellent weekly animal market. Curiously, this market is far less popular than the craft one, and few tourists visit it. For me, it's far more interesting.