There is a fairly large handicraft market in a plaza just outside the entrance to the Ollantaitambo ruins. There are a number of vendors selling woven items, carvings, hats and almost anything made in the area.
What to buy:
There will be street vendors but not as much as in Cuzco, thankfully. There is also lots of displays on the sidewalk for you to pay attention and perhaps go inside for more viewing. You can find pretty much everything in Ollantaytambo in terms of souvenirs and crafts and my guide Ronnie told me it's one of the best place in the area to buy at a good price.
What to pay: Barter, barter, barter...
If you have chosen the tour group option to visit Ollantaytambo, there are plenty of choices for shopping. Pisaq, Ollataytambo and the "typical" andean village of Chinchero are all there for you and your dollars. When monuments are ahead of trinckets, Chinchero is the obvious choice for shopping - it comes last on the itinerary, at the end of the day and happens to be low on the monument significance scale compared to the others.
What to buy: Regular fare of puppets, post carads and CDs.
What to pay: The minimum is the SOL.
Pisac's local market is justifiably popular and very colorful as well, with locals dressing in traditional clothing.
What to buy: You can buy most anything here, locally made sweaters and hats, fruits and vegetables, and even cooked meals.
This is more of a true local market that sells fruits and vegetables though there are a few crafts and the ubiquitous items like mineral water and toilet paper.