Undoubtedly the most famous food you'll find here is the momo, a local dumpling. It can be steamed or fried, stuffed with chicken, buff or veggies. The cuisines on offer are a mix of Tibetan and Indian, with a decent amount of variety available for both. Thamel hosts several restaurants of many different cuisines, ranging from local to Indian to oriental to even European. Some of these are local and some are for tourists, the latter being comparitively expensive.
Indian food can be found in plenty of restaurants in Kathmandu. Western Tandoori is a small joint in Thamel that serves quite a delicious variety of Indian curries and naans. You can find many such restaurants across Thamel. OR2K is another restaurant in Thamel only which caters to the needs of vegetarians and vegans, with emphasis on the middle eastern cuisine. Food joints and restaurants for vegetarians can also be found along temples and shrines.