A city of many contradictions. Ultra-liberal capital of conservative Texas. Has more bars and clubs per capita than any other city in America, but also the highest rate of book purchases and internet connectivity. Home of corporate sell-out fest SXSW, but also one of the most fiercely independent music and film scenes anywhere. Headquarters of uber-death-preppie George W. Bush, but also more hippies, phish-heads and trustafarians than you can shake a thai stick at. Workaholic techie town where Eeyore's birthday is an official citywide holiday.
Austin's sobriquets include City of the Violet Crown, coined by sometime resident O. Henry in reference to the profusion of wildflowers which come up in spring, the positively Lovecraftian City of Perpetual Moonlight, because of the moonglobes, some of the first electric lights in any city, which still work, and Live Music Capital of the World, which is even on the arrival gates at the airport. Austin is one of the friendliest cities anywhere (except during SXSW), and is heaven if you happen to enjoy beer, ethnic food, marijuana, or any kind of music at all. Sadly, as other noders have noted, not even a fiercely pro-planned development city council has been able to keep growth under control, leading to awful traffic, a painful real estate crunch, and ever-increasing sprawl. Blame the dot-coms.
Even Austin's history is weird and a little magical. The (perhaps partially apocryphal) story of how Austin came to be the capital of Texas and gained its name, locally known as the story of the "archives war": In the early days of the Republic of Texas, Mirabeau B. Lamar, a slightly unbalanced individual, was elected President of Texas on account of his opponent dying a few days before the election; the dead guy still almost got half of the vote. Lamar decided to move the capital of Texas from Houston to the little village of Waterloo in the Hill Country. Perhaps the name Waterloo was at caused Lamar to choose it, the B. in his name was short for Bonaparte. He envisioned the new capital as the seat of the empire he planned to build straight across the Comanche Country to California. After Lamar's term ended, and saner heads prevailed, the decision was made to move the capital back to Houston. The locals, having already figured out that being the capital of Texas was a good racket, hid the archives of the entire state in the Bee Caves south of town one dark night, and refused to release them unless Waterloo stayed the capital. Eventually a compromise was reached where Waterloo would remain the capital, but change its name to Austin in honor of Stephen F. Austin, one of the founding fathers of Texas who hadn't gotten anything named after him yet.