Panama city doesn't have public transportation in the strictest sense, but that doesn't mean you're stuck with cabs or walking.
Privately-owned school buses (called 'Red Devils') patrol the major thoroughfares, sporting elaborate paint jobs and blasting salsa music from interior and exterior speakers. The ride is bumpy, the conditions are sweaty and cramped (especially if you're on the tall side - I'm 4'11" and felt the pinch) and can be unsafe (18 people were killed when a bus exploded just last month) but are still one of the best ways to see a broad part of the city at one shot, and the price (25 cents) can't be beat.
They're due to be replaced by a real honest-to-gosh municipal bus system next year, which will be a real loss, even for those who've never set foot on a Red Devil.
I waited to take a trip until after I'd spent a couple of days in Panama City, when I had a good handle on the lay of the land, and had spent a lot of time admiring the murals and celebrity portraits on the buses that came through the big turnarounds where several routes converged at one intersection. Coming back into the city from a side trip to Bocas Del Toro, I decided to see if I could make my way back to my hostel in El Cangrejo from the domestic airport via bus. The buses show up at major destinations like the Allbrook mall (near the airport) and otherwise stick to single-street routes. I hopped a Via Espana bus crowded with costumed marching band musicians on their way home from a parade. The musicians mostly looked like high-school age kids to me, and they did what high-school age kids do on a school bus - made noise, horsed around, and provided a bit of live accompaniment to the music pumping from the speakers above the driver's head.