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This is a typical square within the city walls. One can find the town hall with its bell tower and clock here. There are many bars, cafes and restaurants along the sides, with many people enjoying drinks and food, sit back, relax and people watch.
We went to Madrid with our adult kids and their spouses. We stayed close to Plaza Mayor and spent quite a bit of time there, eating and people watching. It's very likely, and kind of crowded, but still a great place to hang out.