Although we highly recommend meandering through the Hill Country, if you're only going to see one town, make it this one. The 19th-century German settlement packs a lot of charm into a relatively small amount of space. There is a boggling array of welcoming inns and B&Bs, and a main street lined with historic buildings that house German restaurants, beer gardens, antique stores and shops. The downtown museums are interesting too.
Many of the shops are typical tourist-town offerings (think T-shirts, fudge and faux-quaint painted signs), but there are enough unique stores to make it fun to wander. Plus, the town is a great base for checking out the surrounding peach orchards, vineyards and getaways, such as Enchanted Rock and Johnson City, as well as little Luckenbach, just 10 miles away.