A central meeting point and marketplace (Saturdays) in Ankh-Morpork, a wide-open public space with fountains, upon one side of which are the Great Gates of Unseen University. It is overlooked by the Clock Tower (housing Old Tom) and connected to Plaza of Broken Moons by the Cham.
In Soul Music, the Band with Rocks In are told to report here, to the offices of their new manager C.M.O.T. Dibbler. It takes them some time to realise that Dibbler has a very open-plan office, from which he usually sells sausage-inna-bun from a tray slung round his neck...
Sator Square is also a place where free speech is allowed, if not encouraged, and is a place for ranters, haranguers, and self-absorbed mumblers to say their piece. This all comes under the heading of street theatre, and no doubt the Patrician has somebody in the crowd to memorise names and faces and take notes, on the off-chance that what is said might actually be important, or lead to consequences.
Pratchett's source for the name is obviously the "SATOR Square", the most famous of magical Word Squares, which looks like this:
S A T O R
A R E P O
T E N E T
O P E R A
R O T A S
In Germany, as early as the late Roman era, it was engraved on silver plates which were then thought to put out house fires, and on silver money to remove a fever or other curse. It was also written on parchment and the parchment fed to cattle to keep them from being bewitched. It is a palindrome and can spell out other latin phrases, google it and find out.