If a high-rise luxury hotel is your cup of tea, then my best advice is that you stay in Brussels and commute to Bruges. But if you like the idea of a small, atmospheric hostelry, perhaps right on the banks of a picturesque canal, with modern (if not necessarily luxurious) facilities, then opt to stay at one of the hotels reviewed here. You'll find that the accommodations here enhance your visit by enabling you to sink into the timelessness of Bruges.
Try not to arrive without a reservation, particularly in summer. With a mind-boggling four million visitors a year, Bruges is Belgium's premier tourist destination, and even though many are day-trippers, it's still just about essential to make reservations at least 2 weeks before you plan to come. If you do come into town with no place to stay, head immediately to the tourist office -- like tourist offices throughout Belgium, Bruges has a very good reservation service and also can book ahead for you. Accommodations are less heavily booked during the week than on weekends.
Choosing an area is fairly straightforward in Bruges: Virtually all of the city's hotels are inside the ring canal that delineates the Old Town. If you want to stay within 5 to 10 minutes walking time from the Markt or the Burg, you'll have virtually Bruges's entire hotel stock to choose from. A bit further out from here -- say, 15 to 20 minutes walking time from these two central squares -- there are still plenty of options, and you're more likely to find a hotel in a tranquil spot, and on or near a canal.
Note that where hotels have no private parking, there's another option beyond the "Limited street parking" that might be listed in the service information. Bruges's small city center holds six big public parking garages, all clearly marked on access roads. So there will always be at least one within a short walk of your hotel.