Best cities to live in Switzerland

Traditionally, expats mention Zurich, Geneva, Lucerne, Berne and Lausanne as good cities to live in. This is true - but the living has its price as well. Prices for housing can be astronomous and it may be very hard to find something suitable at all.
If you're not on an unlimited budget, you will find some smaller Swiss towns to be an acceptable alternative. You may have to commute longer to work (but public transport is excellent) but housing is considerably cheaper.
Furthermore, be aware that income tax rates vary considerably from canton to canton and from town to town. Traditionally, the French speaking cantons and Berne and Solothurn are relatively expensive and the central cantons of Zug and Schwyz have relatively low tax rates - but there are lots of local differences and it may depend on your income level as well.

Of course, Switzerland has fantastic scenery and it may be very attractive to live somewhere in the mountains. Be aware, though, that distances to towns an cities can be considerably, and that weather conditions high in the mountains may effect travel times and possibilities, particularly in winter.