Dali Old City and its architecture have an aged look to it. However, the hippie restaurants and bars give it a distinct, relaxing atmosphere mixing the old and the new.
It's not as developed as its replacement destination -Lijiang, but retains a lot more flavor than its too commercialized neighbor.
The best thing to do is simply get lost and wander the streets. It's not that big and no need to worry about getting lost as long as you are within the 4 walls.

