Located just north of downtown Madrid (its southern border is Gran Via), the Malasaña district has ridden the wave of the countercultural "movida" movement and come aground in the 21st century a bit more put-together and with lasting appeal than you'd expect from a place that grew up on hedonism and rampant self-expression.
Probably the most bang for your buck in social circumstances like nightlife and cuisine, Malasaña is all about vintage shops and cafes, hip bodegas, and tapas stops galore. Grab a burger at Zombie Bar if you can keep the decor from making you jumpy, grab coffee and a couch (if one ever opens up) at Lolina, grab your assortment of tapas at La Tita Rivera or Lateral, and grab your dancing shoes for a show at Ocho y Medio. If you aren't sure where to start, there is always a pleasant buzz around Plaza Dos de Mayo and Plaza Santa Ana. Start there and make your moves as the evening progresses.
Note:There are plenty of authentic Spanish eateries in Malasaña. Some of the best include Casa Julio for their croquetas (mashed potato and meat-filled fried items), Olé Lola for its smokey ambiance, and Taberna Albur for delicious Spanish food in a diner setting.