Bethlehem is located just south and east of Jerualem and is a pretty well known town. You can take bus 22 from East Jerusalem or your can take any Arab taxi. YOu just need to have your American passport with you to pass the security checkpoint.
Once you are past the border there are many places to visit, Rachel's Tomb, the Church of the Nativity, the Milk Grotto, Shepard's Fields as well as Mangar Square. With the exception of Rachel's Tombs, all of the sites are within walking distance of the bus station and main taxi area. To visit the tomb, its best to do that on the way in from Jerusalem. Rachels Tomb is one of Judaism's most sacred sites and it is also revered by Christians and Muslims as well. It is the tomb of Rachel, Jacob's wife. Lots of people come here to pray for fertility.
The other major attractions are the Church of the Nativity, which is considered one of the holiest spots for Christians. Many believe that Jesus was born here in a cave. The 4th Century church was built by Emperor Constantine and altered later on in the 6th centurt. The church is considered one of the most likely spots of the nativity and is one of the world's oldest churches.
The Milk Grotto chapel is considered to be the site where the Holy Fmily stayed on their way to Egypt. Mary was breast-feeding Jesus and some milk dripped on the floor causing the rock to turn chalky white. Women come here to pray as well for lactation. Shepards Fields is associated with the events of Ruth in the Old Testament book.
There are many good restaurants in Bethlehem and we ate a nice middle eastern meal close to Beit Sahur. I visited with the Director of the Institute for HOly Land Studies, George Rishwaji, and I've stayed at the Jacir Palace Hotel, and Intercontinental property that is considered to be the nicest hotel in the area.
Much of the shopping can be found in and around Mangar Square, the major square just outside the Church of Nativity. Lots of little shops offering religious items and other souvenirs can be found here. Its always worthwhile to try to bargain.