I have recently been to Madrid and made a day tour to Toledo. I wanted to post a brief review for others to read but in fact I did not manage to find a place in Tripadvisor to do it.
So, we travelled by railway, but it seems that for individual tourists, there are two other options, namely buses and excursions (full day or half day).
About buses, all I know is that when I bought our Madrid travelcards at the airport, the lady asked us if we wanted the zone "A" (Madrid only) or "T" (Madrid and area, and she explained it included Toledo). I did not buy "T", because for 7 days, it would be 50 EUR instead of 25 EUR.
Organized tours: when we boarded the red double-decker for Madrid sightseeing, amongst other materials we were handed a leaflet about the organized tours. The travel office organizing it is "Julia Travel", they also have a logo of Gray Line displayed. Their website is www.juliatravel.com. Toledo excursions: half-day 45 EUR (senior 65+ 34 EUR, child 6-15 years 23 EUR), for full day there are 3 options "without lunch" - 60 EUR for an adult, "with lunch" - 72, and "with typical lunch" - 79. The half-day ones start 8:45 or 15, the full-day 9:00, I do not know where from but I am sure it would be easy to obtain this info. There are other tours described in that leaflet. I have noted that the tour offers "OUTSIDE view of the cathedral". It would be a pity not to get inside.
However, we decided to go by train. What a surprise it was for us when we made it to be at the Madrid Atocha station in time for 9:20 train, to be informed that there are no tickets until the train 12:20! The trains are definitely not frequent enough for such a big interest. On bank holidays, the first ones are 9:20, 10:20 and 12:20 [please check the exact times], on working days there is 1 or 2 more earlier. We decided to postpone our travel and bought our "ida and vuelta" (return) tickets for the day after. This was a very good thing to do; make sure you do buy your tickets back!! They are not very expensive, with return tickets the price printed for Madrid-Toledo is higher than back, anyway in average it is about 11 EUR one way. There is no option of boarding the train without a ticket, and no option to get a tickets if all the seats are sold out (in Poland, for example, as crazy as it is, the railway must not refuse you a ticket even if there is not a seat for you). Before you board, there is a security control (luggage X-ray) and the ticket control. I am sure many people would prefer to stand up between the coaches for 35 min than wait at the station for hours, but this is just not possible.
When we arrived, there were 3 options to get to the actual old city: (1) the red double-decker (it is not a hop on-hop off, but there is a choice of 3 options: 1, 1.5 or 2 hours, the most expensive (longest) one includes visiting the cathedral (the ticket to the cathedral itself costs 7 EUR). The total price for the longest variant was somewhat about 20 EUR. In the red double-decker in Madrid I got a booklet with discount vouchers, including one for this bus in Toledo, however I left it at home which frustrated me a lot so I decided not to go :-). (2) Taxis are waiting in front of the station, displaying the flat rate of 4.5 EUR for driving up to 4 people to the old town (3) There are plenty of urban buses @1.4 EUR one way, two steps from the station. There is also a stand of Tourist Information at the station, they will offer you a map and tell about the buses etc.
Once in the old town (at Zocodover sq.), you can decide to take a minitrain (Treno Turistico) - 45 minutes for just 4.40 EUR, it is definitely worth it, the train also get outside the walls on the other side of the river and you can see the panorama. Beware! Usually in those trains you take a seat and pay the person who comes to you. But not here! If you do so, the man will ask you to leave. You must buy your ticket before you board, at a ticket office in a nearby street. We had to wait 45 min, but I must say they apparently know how many tickets to sell, as the train was not overcrowded. Spend your waiting time eating sweets (pastries) from the local shops :-). After the trip, we made a walk, and visited the cathedral (7 EUR or, if with audioguide, 10 EUR) plus several other buildings such as Juan de los Reyos convent, two sinagogues, or la mezquita - the tickets usually are 2.5 EUR. It is definitely worth to go for a day trip to Toledo from Madrid.
We had tickets back for 19:20 but we reached the station before 18:00 and asked if perhaps we can exchange our ticket for 18:20. Mind you!! The trains were Full not only for 18:20, 19:20 and 21:20 (i.e. all trains that day) but even for 6:30 the day after, so make sure you don't stay in Toledo unless you planned it.