Euros, Dollars, Or even GBP are greatly accepted so either is fine. But the local currency is the YTL ( turkish liras ) Change your currency as needed at the doviz ( change office bureau ) Travellers checks are not recommend in Turkey as they are a hassle and there is also a service fee to cash them at the banks. A lot of hotels will not accept. Better with dollars, or euros or better yet use the ATM's.

Although traders accpt currencies other than the Turkish Lira it is to their benefit not yours.  

The usual advice is to exchange a small amount before you travel for your first day or 2. Then exchange in Turkey where the rate is usually better than outside Turkey.

Credit and debit cards are widely accepted. Even smaller shops now accept them along with most restaurants, cafes etc.  

Exchange some of your foriegn currency to Lira at a change offices in Turkey. But don't exchange at the airport wait until you can get to a change office you will get a better price. However you can use the ATM at the airport at your arrival. As you will need some Liras to pay for small items to the markets, taxis etc. Small places probably not take Euros or dollars. Most of the changes offices are located in the center of town and the hotel will give you some help or directions.

If you use a ATM please use one that is located outside of a national bank and also during regular business hours. Mon-Fri 9am-5pm.

This way if you experience any problems with your card you can directly report it at the bank. Also do make sure that you advise your bank of your planned travel to Turkey. If not the bank after a transaction or two may freeze your card after one or two transactions. Also check with your home bank for any charges that they may make. The use of ATMs in Turkey is free.