If you're just looking for short or medium term accomodation, try Fatima's and Fatima Dois ('Fatima's no. 2'). Any local in the centre of town will know these places which have single/ double rooms as well as dorms... and a great bar open to the locals as well. Great atmosphere.
If you're talking about upmarket hotels, there's a very famous hotel called the Polana on Av. Nyeyere - a really classy ex-colonial establishment (with prices to match!).
Enjoy your stay - you'll love it!
Msafiri.
PS. If you're into music, you have to check out the open air club (I forget the name of these places, but they're like Casas de la Trova, if you know Cuba) - local musicians, sometimes famous ones, just turn up with their instruments and join in impromtu.