I went to PSU for Law School, so I spent some time there. When I was ignoring the studying I had to do, I checked these places out....
My two favorite places or slightly off campus:
(1) Faccia Luna - Food. great brick-fired pizza and italian joint (more locals); and
(2) American Ale House - Food & Drinks. Great gumbo, but just a great atmosphere. Tends to be more of a grad school/adult hangout. Probably my favorite place in state college.
On campus, I like:
Spats - Food. Also decent Cajun fare, but if you dont mind a cab ride, Id rather go to American Ale House.
Liberty Craft House - Food & Drinks. Can get State-y but good food and large selection of beer.
Pickles - Food & Drink. Its bar food, but its my kind of bar. Laid back, large windows open when its nice, not usually too crowded until late or on game days.
Pho 11 - If you like Pho, this is the place to go. Great pho.
Breakfast - Please get a breakfast burrito at the Frazer Street Deli. You will not be disappointed. Im not a big breakfast burrito fan, but I dream of theirs.
Most bars on campus are going to be State-y, but my best guess where you can go lessen that effect is: Kildares, The Rathskeller, Inferno and the Allen Street Grill.
Champs is an okay off campus spot. Decent food, normal drink selection. Average sports bar.
I know Otto's has a reputation, but it moved locations about 5 years ago and changed menus and really went downhill in my opinion.