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I am an Indian citizen in US on a F1 visa. I have a flight from Orlando to New Delhi in December 2021 with a 7 hour layover in Rome. My plan is to make use of this time and hit a couple of spots in the city.

Can anyone give me an idea if I need to apply for a transit visa or a regular Schengen visa to get out of the airport and visit some places?

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If you would like to leave the transit area and pass the Schengen border (e.g. to visit the city), you will need a regular type C short-term Schengen visit visa.

You do not need an airport transit visa to transfer through an Italian airport as an Indian citizen (in any case, your valid US visa would exempt you from any Schengen airport transit visa requirement), as long as you stay in the international (non-Schengen) transit area of the airport.

An airport transit visa, even if applicable, does not allow you to leave the international transit area of the airport. You will not be permitted to enter the Schengen area without exceptional circumstances (e.g. cancelled flight).

An airport transit visa (ATV) authorises you to pass through the international transit zone at an airport located on the territory of the Schengen State and to await a connecting flight to a non-Schengen country. The ATV does not allow you to enter the Schengen territory (to stay at a hotel or to take an onwards flight to another Schengen State, for example).

https://ec.europa.eu/home-affairs/sites/default/files/what-we-do/policies/borders-and-visas/visa-policy/docs/frequently_asked_questions_en.pdf

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    so yes, he WILL need a visa if he'd need one were Italy his final destination in order to leave the airport.
    – jwenting
    Commented Jun 14, 2021 at 11:23

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