Although somewhat sprawling, it is easy to feel the Gobi encroaching upon you. Walk any direction for about 20 minutes and you are in the desert. Gurvan Saihan mountain range peers over the town from the west, and can act as a guide if you lose your bearings.
With black smoke coming from the power station, and it's dust roads, it's not a very interesting town on its own, but it's a good place to stock up with food for your excursion into the desert.
Although there is not much to do in Dalanzadgad itself, it is the jumping off point for the three main tourist attractions in the Gobi: Yoliin Am (Vulture's Mouth), Khongriin Els (Singing Dunes), and Bayanzag (Flaming Cliffs).
The new paved road has been completed in September 2014 and there is a daily bus from Ulaanbaatar at 08:00 and 16:00 (about 7 hours, 22.900T). It leaves at the bus station which you can reach by the Electrobus #4 in Ulaanbaatar and arrives at the North-East part of Dalanzadgad just opposite of the Mazaalai Ger Camp. The bus stops midway for about a half hour at a restaurant in Mandalgovi for lunch.
As of summer 2017, Hunnu Air and Aero Mongolia fly between Dalanzadgad and Ulaanbaatar with various frequencies. The small terminal is air conditioned and has a WiFi sign, although no open WiFi spots were available as of June 2017. There is a snack and souvenir shops. No regular public transportation is available from airport to Dalanzadgad.
There will often be some drivers at the drop-off point for the buses.
Yollin Am (Vulture's Mouth) is one of the three attractions of the South Gobi. It is only an hour's drive outside of DZ, though you must rent a private car. A day trip (at the time of writing; 2012) costs about 80,000 T. The canyon itself is gorgeous, and most of the year is covered with ice. Temperatures within the canyon will be significantly colder than the surrounding desert. Wear warm clothes. During tourist season you can ride a horse until the point where the canyon narrows and you must walk. If you continue to walk a mile or so the canyon will widen and you can hike up a large yellow plain on the right to get a good view of the desert.
Leave! The reason to go to Mongolia lies outside of town. Find a driver and go see the 3 sites.
There are a few good supermarkets in town (Maral and Tsogtlog). The following restaurants in town (as of April, 2013) are pretty good:
-Kimchi House: Certainly the best restaurant in town. Awesome authentic Korean food, Ulaanbaatar quality restaurant. The Tagtoritan (spicy chicken soup) and Tagjorim (spicy chicken dish) are not to be missed. Kimchi house is on the second floor of a brick building across the street from the Oyu Tolgoi office which is downtown.
-Dalanzadgad Hotel: On the first floor of the DZ hotel is a restaurant called Bayanburd. It offers (relatively) good food. The beef curry isn't bad. Neither is the chicken with pineapple.
-Khaan Uul Hotel and Suite: On the second floor is the most expensive restaurant in town, though certainly not the best. The cordon bleu isn't bad.
Also, practically ever hotel in town doubles as a bar/restaurant/karaoke place. Just walk in and you can get buuz, khooshor or tsuivan.
Mazaalai Ger Camp, (North-East of Town). Recommended by Lonely Planet, this location is no longer in operation. 10.000T. edit
Gobi Sands Hotel, (Town center). Relatively new hotel in the heart of town. Singles from 79.000 per night, breakfast included. Stable and fast wifi. Very expensive restaurant on the top floor with great views. No English spoken. from 79.000T. edit
Dalanzadgad Hotel, (On the road between the center and the airport, just next to the square). This used to be the best place in town until Gobi Sands and Khaan Uul opened their doors. Still has one of the best restaurants in town. Little English spoken. 80.000T. edit
Khaan Uul Hotel and Suite, (Town center). The most expensive place to stay in town. It's also the place that mostly resembles Western standards, including their pricing... Has a restaurant and stable and fast wifi. English generally spoken. 100.000T. edit
Like in most regular small Mongolian towns, dangers and annoyances include:
Most of all, dehydration will be your biggest enemy when visiting the Gobi, including Dalanzadgad. The air can get extremely dry, leading to fast dehydration. One of the early symptoms is a sore throat. On a warm day, you get dehydrated faster through transpiration. Make sure you drink a lot throughout the day, even if you don't feel thirsty yet. Bottled water is your safest choice and can be bought at any supermarket in town: some of them are open almost 24/7.