Sepang is the nearest town to the circuit, but most visitors choose to stay in the city of Kuala Lumpur because of the much larger range of accommodation and attractions on offer. Accommodation is very reasonably priced in comparison to many western countries. Similarly, tourist activities, restaurants, and bars all tend to be good value in Malaysia, and they're in plentiful supply in Kuala Lumpur.
Sepang International Circuit is located outside of Kuala Lumpur, but excellent road and rail links make reaching the circuit relatively easy.
If your interest is just in the Grand Prix then you may want to consider staying at a hotel near the airport, which is located very close to the circuit.
Although nearby Kuala Lumpur is a built up city, there are several campsites and resorts outside the city. Jijan Camp and Kem Pengakap Seremban Barat are the closest campsites to the circuits, both in forest settings. Alternatively, an hour away is Pantai Kelanang Campsite, located on the coast line, close to Carey Island.
In Kuala Lumpur, there are many accommodation options to chose from. There are familiar names, including Hilton, JW Marriott, Grand Hyatt and Four Seasons all conveniently located in the city centre. Closer to the airport and the circuit, there are also many options to chose from, including Sama Sama Hotel, Aerotel Kuala Lumpur and Movenpick Hotel, to name a few.