As with most major cities there is no "best" hotel in Prague; there are, however, best hotels for individual tastes and priorities.

My favorite in Prague is the Aria (mentioned earlier in this thread). It's 2 stones throws from the Charles Bridge, but on the Prague Castle side (that is, the quieter, less touristy side) of town. The hotel is elegant and music-oriented: each floor is themed for a music style. Rooms have great music systems, and the hotel has an enormous library of CDs and a wonderful music concierge to help you choose. The public areas are gracious, the rooftop patio is an amazing place for drinks or a meal, and the staff are wonderful. Airport limo pick-up is included in the room rates, and hotel cars are always available to take you around town.