Nestled in the foothills of the Sierra de Guadarrama, the city's main attraction is the world famous Monastery of San Lorenzo de El Escorial (El Escorial for short), a World Heritage Site that was the political centre of the Spanish empire under King Philip II. It is often visited as a day-trip from Madrid, however it's also a good place to spend 2 or 3 nights so you can visit the surrounding countryside and the Valley of the Fallen (Valle de los Caidos).
Monastery of San Lorenzo de El Escorial
Originally commissioned as mausoleum for his father Charles V, when building completed in 1584 the grounds included a basilica-church, monastery, royal household and library. The pantheon contains the remains of Phillip II and those of his parents, Charles V and the Empress Isabel of Portugal. 
Some highlights not to miss in El Escorial:
Valle de los Caidos (Valley of the Fallen)
This is the world's largest free-standing Christian cross. Franco′s tomb and memorial to Catholics (both in Franco's side and opposite) killed in the Civil War. Construction was ordered by Franco and erected on rocks through the labor of many Republican prisoners of war.
It is located quite far from the monastery.
If you arrive in the town by train, note that it is a twenty minute walk into the main town, past the taxi rank and up the hill, bearing right at the top, past the monastery, where there is an autobus station - access to buses is downstairs, at the back, via a walkway, which can be slightly confusing, as there are often few staff to ask.
Note that while it is possible to access the Valle de los Caidos by the 664 leaving Madrid from Moncloa, the reverse journey - from El Escorial - isn't possible. The bus takes a different route and zips straight back to its origin at the Moncloa terminus in Madrid. The drivers will laugh at you if you try. The stop for the Caidos on the 664 is Cruce de Cuelgamuros. This, however, still leaves you with 3km of steep hill to climb, so budget carefully. The monument closes at 18h00 in the summer, and 17h00 in the winter, with last entry a half hour before.
It might be possible via the 660. But the best bet is the special bus - every day at 15h15. This costs around 15 Euros, including entry to the monument. It returns towards El Escorial from 17h30, and can be caught from the main autobus terminal - again, you will have to go to the confusing downstairs area.
If catching the regional train from Madrid Atocha (Puerta Atocha), note that the relevant service isn't posted on the boards under the 'green' C-line. It comes only once an hour, goes via Sol, and normally departs from platform 5 or 6. Journey time: 1h to 1h15.
On the whole, this is an alarmingly tricky place to get to without private transport. Budget lots of time if you want to attempt it.
Most visitors arrive from Madrid and most of them just for a day trip. Access from Madrid is easy due to the large number of local trains every day. Trains can be caught at either the Atocha or Chamartin stations in Madrid. If you take the train, once you arrive in the town of El Escorial you will most likely want to take the local bus upon exiting the train station to get to the monastery (otherwise it is a long, uphill walk). Buses from Madrid leave from the Moncloa station and will drop you directly in front of the monastery. To catch a bus back to Madrid, simply take a short walk to the bus station on Calle Juan de Toledo and wait for the next leaving to Madrid.
Cerveceria 100 Montaditos - Calle del Rey 20 , Home to the famous 100 "montaditos" (small sandwiches), Great place to go for a cheap drink with a bite to eat. Small sandwiches are between 1 and 2 Euros , while a pint of beer is just 1.50 euro