Buses for Otavalo leave from Quito’s Terminal Terrestre every 20 minutes. The ride north takes two to three hours and costs $2. Los Lagos (Tel: 572266 / 572267) and Co-op Otavalo (510323) are two bus companies that go to Otavalo. Though it is possible to catch the bus along its route in Quito, going to the station will save you a lot of time and is much less of a hassle.
Otavalo is a stop along the Pan-American highway, so getting from the town to almost any other destination to the north is fairly easy. Ticket prices are based on trip length and generally cost $1 per hour.
To get back to Quito from Otavalo, head to the bus station just a few blocks past the edge of the market and listen carefully – there is bound to be someone yelling, “Quito! Quito!”, who can direct you to the right bus. If you're trying to get a bus on the weekends, head to the station fairly early (or expect to stand). Buses can get quite full during market days, when the town explodes with travelers itching for a bargain.