Hostelbookers.com has been keeping tabs on searches and bookings for 2007, and just published a list of the top five most popular destinations among budget travelers for 2007. They are: London, Amsterdam, New York, Paris, and Barcelona.
The funny thing about the list of most popular cities for budget travelers is that not one of these destinations is known as being particularly affordable. I have two theories. The first is that because these cities tend to be expensive, travelers who might otherwise be able to spend a bit more on accommodations are looking down market (and as someone who loves hostels, I mean that in the nicest way possible) in order to better afford a visit, and this commingling of actual budget travelers and recreational budget travelers is inflating the numbers.
My second theory is one based on personal experience. As someone who visited every city on the list as a starving student, I can vouch that even on a tight budget, there are plenty of free or affordable things to do in each of these cities. And eating well on the cheap is a simple matter of seeking out important budget-travel food groups such as panini, falafel, and day-old baked goods.
The other obvious answer to the budget-travelers-in-expensive-cities mystery is that these are among the most popular cities in the world to visit, so of course even for budget travelers, the numbers are going to point to these popular destinations.