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Hostels provide budget-oriented, sociable accommodation where guests can rent a bed, usually a bunk bed, in a dormitory and share a bathroom, lounge and sometimes a kitchen. Rooms can be mixed or single-sex, although private rooms may also be available.
Hostels are generally cheaper for both the operator and the occupants; many hostels have long-term residents whom they employ as desk clerks or housekeeping staff in exchange for free accommodation.

In a few countries, such as the UK, Ireland, India and Australia, the word hostel sometimes also refers to establishments providing longer-term accommodation (often to specific classes such as nurses, drug addicts, or court defendants on bail) where the hostels are sometimes run by Housing Associations and charities. In India, Pakistan and South Africa, hostel also refers to boarding schools or student dormitories in resident colleges and universities. In the rest of the world, the word hostel refers only to properties offering shared accommodation to travellers or backpackers.

Within the 'traveller' category, another distinction can be drawn between hostels which are members of Hostelling International (HI), a UK-based, non-profit organization encouraging outdoor activities and cultural exchange for the young (formerly the IYHA), and independently operated hostels. Hostels for travellers are sometimes called backpackers' hostels, particularly in Australia and New Zealand (often abbreviated to just "backpackers").

In 1912, in Altena Castle in Germany, Richard Schirrmann created the first permanent Jugendherberge or "Youth Hostel". These first Youth Hostels were an exponent of the vision of the German Youth Movement to let poor city youngsters breathe fresh air outdoors. The youths were supposed to manage the hostel themselves as much as possible, doing chores to keep the costs down and build character as well as being physically active outdoors. Because of this, many Youth Hostels closed during the middle part of the day. Very few hostels still require chores beyond washing up after self-catered meals or have a "lockout".

There is less privacy in a hostel than in a hotel. Sharing sleeping accommodation in a dormitory is very different from staying in a private room in a hotel or bed and breakfast, and might not be comfortable for those requiring more privacy. Hostels encourage more social interaction between guests due to the shared sleeping areas and communal areas such as lounges, kitchens and internet cafes.
Care should be taken with personal belongings, as guests may share a common living space, so it is advisable to secure guests' belongings. Most hostels offer some sort of system for safely storing valuables, and an increasing number of hostels offer private lockers; there are other things to consider as well when choosing a safe hostel, such as whether they have a guest curfew, uphold fire codes, 24-hour security, and CCTV.
Noise can make sleeping difficult on occasions, whether from snoring, talking, sexual activity, someone either returning late or leaving early, or the proximity of so many people. To mitigate this, some wear earplugs and/or sleeping masks.