Ghandhi Chowk lies to the west of the old city near the Amar Sagar Gate and is where the city's main market and shopping areas are located. There are plenty of shops in the small streets that sell all kinds of things. I bought a Rajasthan flute player puppet and a notepad book where the pages are made out of hand-made rice paper and are bound with camel leather. Also, bargain down the prices quoted at you!
There are a number of carpet shops in or near the old Haveli sandstone homes and in the Fort that offer a fantastic range of carpets, rugs all in the local Rajasthani style.
What to buy: Look out for rajasthani mirror work, rugs and blankets.
Amongst the most beautiful crafts I have ever seen.
What to pay: A big range of prices. I didn't have confidence in my knowledge so I didn't buy. So do your homework first (I later bought a nice, but lesser quality carpet in Kathmandu).
There are several shops in the fort.
What to buy: Clothes, Carpets, Souveniers, Books,....
What to pay: Depends on your negotiation skills.
Jaisalmer is famous for embroidery, rajasthani mirror work, rugs, blankets, antiques and old stone work. Tie-dye and other fabrics are made at the Kahdi Gramudyog Bhavan and Rajsathali Empourim.