Arts Factory Backpackers Lodge is the best hostel we have ever visited. It is a little hard to find the first time, though it's actually quite close to the main street when you're heading into town. We arrived minutes before a heavy rainstorm and the staff told us to quickly set up our tent before we paid or handed our IDs in or anything, which we managed to do just in time.
There is another hostel in the area, but the Arts Factory has a huge sign in front of it, and if you continue around the road you'll find it easily. There's a fair bit of parking, though it is quite far from the camping sites if you are a camper. There are buses that go into town as well as an information desk and travel agent onsite that can help you with whatever you need. Arts Factory also runs a lot of tours and nights out by bus straight from the site.
You can also walk into town or to the beach (this is a must); Byron is beautiful and you should definitely take a trip up the hill to the lighthouse. The water at Byron is incredibly warm and very light blue compared to most Aussie beaches. It also has quite a large sandbank in case you're not an excellent swimmer. If you're a surfer, renting or buying a board is a must. Opposite the reception at the factory is always a range of boards, wetsuits, and other possessions for sale pretty cheaply.
Rooms and Bathrooms
We had two friends who stayed in dorms whilst we camped. Personally, camping was worth it although the camping area was packed! There are tee-pees, which are generally females only, small cabins on the pond (which look amazing), and a huge range of different sleeping areas (you can even stay in an old bus!).
There is a kitchen (it closes at 10 p.m.) with a large shared fridge, plus single-sex bathrooms with a lot of showers for the girls bathroom. There's a pub, another bar, a swimming pool, a games room, Wi-Fi, and some other facilities. The factory runs events, free workshops, paying workshops, tours, trivia, and anything else you care to suggest. Just in the time before and after our shower we met seven people. Everyone there is extremely nice and friendly and generally looking for travel partners, or happy for you to join their travels.
We would definitely recommend this hostel to travelers between eighteen and thirty. It isn't too loud (we fell asleep at midnight), but it definitely is not a quiet hostel.