As befits an island culture, seafood reigns in Chiloé. The signature Chilote dish is the curanto, a hearty stew of shellfish, chicken, sausages, and smoked pork ribs. It's served with plenty of potato bread, known as milcao and chapaleles. Most restaurants here serve curanto, though not every day of the week and usually only at lunchtime. Salmón ahumado (smoked salmon) is another favorite, though salmon are not native to this area. Take care to avoid any uncooked shellfish unless you're certain you can trust the chef.
The archipelago is also known for its tasty fruit liqueurs, usually from the central Chiloé town of Chonchi. Islanders take varieties of berries and apples and turn them into the licor de oro that often awaits you at your hotel check in.
There are several good hotels on Chiloé, but none would pass for luxury lodgings on the mainland. That said, the islands have perfectly acceptable, reasonably priced hotels. Castro and Ancud have the most varied choices; Chonchi, Achao, and Quellón less so. Much-appreciated central heating and a light breakfast are standard in better hostelries. Not all places, especially hotels in rural towns, are equipped to handle credit cards, but ATMs are more readily available than you might expect.
Outside the major cities, lodgings are slim. Hospedaje ("lodging") signs seem to sprout in front of every other house in Castro and Ancud in summer as homeowners rent rooms to visitors. Quality varies, so inspect the premises before agreeing to take a room from someone who greets you at the bus station.