Finding the right hostel for your trip is tricky. One bad move and you could be sharing a room with seventeen unbathed Bulgarian men. Or worse, seventeen American teenage girls. Book the right room, and you could make lifelong friends with an Italian woman whose parents own a villa in Tuscany.
First - your budget. Figure out how much you want to spend per night and stick with it. $20 a night is a good maximum per person per night. If this seems like too much, then go look at hotel prices and come right back
Second - the room. This is the tricky part, and where you should consult all members of your party. How many other strangers are you comfortable with sleeping in the same room as you and are you comfortable with a 'mixed dorm' (i.e. men and women)? Keep in mind: this is the whole point of a hostel, to share the cost of the room with other people.
Third - distance to city center. This is an easy equation: the further you are from the city center, the cheaper it will be, but higher transportation costs. This would be the perfect time to research the city's public transportation costs and times (shut down at night?).
Fourth and last - amenities. What do you want out of your stay? Some common options are: sheets included, wifi access, breakfast included, luggage storage, 24 hour check-in, and luggage storage?
Handy tip - never leave home without a coded lock for your baggage and lockers (No keys! They can get lost or stolen too easily).