Union Square is a nice area. You can hit up the cable cars for trips to Fisherman's Wharf and the International District (if you like Asian food, this is a must). You'll be in an area that is a great mix of shopping, restaurants and tourism - it's a good hub for venturing out too.
For a restaurant suggestion, I had a couple great meals last year at Foreign Cinema:
http://foreigncinema.com/home.html. It's about a 10 minute cab ride from where you'll be staying, and you'll need a reservation, but it's a really cool place - great food, really fun ambiance.