Where you decide to stay in Salvador [1] depends on your priorities and personal taste. If you want to soak up lots of colonial atmosphere, the Pelourinho [2] and neighboring bairro of Santo Antônio [2] offer all sorts of options, from backpacker-filled hostels to sophisticated boutique hotels housed in restored 17th- and 18th-century edifices.
Beach bunnies will prefer to be in Barra [3] (still very central) or at the more traditional mega hotel chains in Ondina and Rio Vermelho [4].
Though other options exist farther along Salvador’s coast, their distance from the center and lack of neighborhood attractions make them ultimately impractical and not so interesting.
Links:
[1] http://www.moon.com/destinations/brazil/bahia/salvador
[2] http://www.moon.com/destinations/brazil/bahia/salvador/accommodations
[3] http://www.moon.com/destinations/brazil/bahia/salvador/accommodations/barra
[4] http://www.moon.com/destinations/brazil/bahia/salvador/accommodations/rio-vermelho