Probably the most visited cities are Minas and Villa Serrana. Minas is the capital, a small city of about 40 thousand people. It is about an hour and a half away from Montevideo and you can either drive or take a bus there. The most popular attractions are not far away from Minas. You can visit Salus, which is the main water company here and they have good beer too (Patricia is the name of the brand). About 10 km away from Minas there are two cerros that you can visit: Cerro del Verdún and Cerro Arequita and right by Cerro Arequita is Monte de Ombúes (a Mount of some kind of tree that I don’t know how it’s called in English).
About 17 km away from Minas is a small waterfall called El Salto del Penitente that is very pretty when it is powerful. When it doesn't rain for a while you don't get to see something very impressive, as shown by the picture below. In any case, the road that takes you to the cascade is again really pretty and makes the trip worth it.
Finally the other city to visit here is Villa Serrana, which is located between the Penitente and Marmarajá rivers. It is a really wonderful place with very few houses located sparsely around the gorgeous landscape. You can walk, fish, ride a horse, hike or just chill out in the middle of nowhere. If you want to stay there for the night there is a hostelling international and there are a couple of inexpensive hotels run by their owners that serve really good regional food.