The Station Hostel is an ok hostel in a good location. It's located about a five minute walk from the train station in the center of Cologne. There are a couple of grocery stores located just down the street, and the Dom (Cologne cathedral) and surrounding shopping areas are within walking distance.
The hostel is a bit sterile, mostly in the HI/prison style, and is fairly functional and initially unappealing. However the recent renovations to the bar/foyer area have done a lot to improve this. There is more socialising opportunity now at the bar (but the stools are not the most comfortable for a long session). The free internet (which is great to have!) helps to make it a popular hang out area and it's a good place to meet other backpackers. Unfortunately smoking is allowed inside, so it can get very smoky, and there is no other alternative common area for people to go if they don't like choking on smoke. Hopefully they'll catch up with the times and ban smoking inside soon. The music usually played at the bar all day and evening is fairly eclectic but great stuff, and the staff is usually quite helpful and friendly. There is plenty of information at the hostel about upcoming events and exhibitions, including up-to-date music and club guides.
Upstairs are the rooms. The hostel originally had about half as many rooms, but more were added when another wing of the building was acquired for use by the hostel. This later addition makes for a very confusing layout. You may have to climb both up and down sets of stairs and through a maze of hallways to reach your room. And the quality of the rooms and facilities varies greatly depending on where in the building your room is, with the upkeep and cleanliness ranging from average to below average. Some rooms have bathrooms en suite. Although you may pay a few euros more, the ensuite rooms tend to have better facilities than the rooms that share the common bathrooms in the halls.
As well as the bar and internet, there are laundry facilities, a decent kitchen, and free safes and luggage storage. Breakfast is not included, but is available at the bar for a reasonable price, including great scrambled eggs and bread for 2 Euro. Whilst Station Hostel is not especially inspiring, it has everything you need and can make your stay in Cologne very enjoyable.
It's also worth asking for a room in the newer wing of the building since those rooms are a little nicer than those in the older part. Be warned that this is a town that doesn't have enough hostels to meet the demand. So this hostel (and the others as well) may fill up quickly in the high season, particularilly on weekends, so booking a bed ahead of time is highly recommended during those times.