Without a doubt Dam Square is the best place for people watching.  Most, if not all, tourists pass through Dam Square at least once during their visit.  What this means to you, the people watchers out there, is that you will see people from every walk of life, fellow tourists, transplants from all over the world, and of course, the Dutch.  There are restaurants where you can grab a seat, order a drink and sit awhile or you can sit on the steps below the big statue depending on your mood.  Carnivals are set up in Dam Square throughout the year.

Not to be missed is the Red Light District where you will have as much fun watching the tourists as the official entertainment. Where else can you see a group of little elderly Asian women giggling as they come out of a peep show?! Don't be afraid of the RLD, it really is safe and totally unique.

Next would be the Leidseplein at the end of Leidsestraat.  This square is surrounded with restaurants, street vendors/performers, coffeeshops, and shopping.  As soon as the weather warms up even a little bit tables and chairs are set out under graceful shade trees for al fresco dining and people-watching.  Even the smaller cafes on side streets, which can be some of the loveliest, put up as many tables and chairs as they can.  Most of the trams pass through here so there is lots of activity.

Another great location is the Rembrandtplein.  It is along the same lines as Leidseplein but a little lower key.  A fun square with a variety of places to sit, order something to drink, and enjoy the passersby.