1. Gorgeous alpaca wool clothing at Kuna inside the Libertador Palacio del Inka hotel in Cusco where we stayed. The offerings were pretty reasonably priced (20 percent discount if you're staying at that hotel), but the clerk advised us to wait one more day to buy anything, because there would be a half-off sale the next day. Sure enough, when we returned the following day, nearly everything was 50 percent off. I bought a beautiful, colorful cape, and my daughter got several items. They are real treasures.
2. Ceramics at the Pablo Seminario studio in Urubamba. (I think he has an outlet in Cusco as well.) The large items are very expensive, but smaller things like mugs and bowls are reasonable. These are my favorite souvenirs of all.
3. The market in Pisac has a lot of tourist-friendly items. Strangely enough, one of my best souvenirs is the colorful potholder I got there. Be careful, though. My daughter bought some cute llama earrings. There were two pairs in the box, but when the seller packaged them, she included only one pair. Our bad--we should have been watching more closely--but it was still disappointing.
If you don't get quite all of your shopping done until the last minute, there are some nice stores in the Cusco airport. Shop away!