We visited the small town of Carvoeiro a few times, and also one a little further away called Ferragudo. In Ferragudo we ate the most amazing meal of freshly caught fish and drank the delicious local 'green wine'. The restaurant was called A Ria (the hotel shuttle bus driver's favourite place to eat!) and if you are ever nearby, please go! We didn't eat out too much (budget, boring) but there are some highly rated foodie places around, should you want to visit them (of course you do).
On our penultimate day we walked from Carvoeiro to a small place a taxi driver had told us about. Our favourite thing to do in foreign countries is to ask the locals their favourite places, and this was his. Algar Seco are a small cluster of caves in the cliff face. Half way down (in a photo below you can see a white canopy, which is it) there is a small restaurant overlooking the sea. It's beautiful in it's simplicity, just the sea and sky and rocks, and this was our second best meal of the entire trip - chicken piri piri cooked on a outdoor grill on the side of a cliff face? YES. Also some gorgeous wihite Sangria that deserves it's own mention. Apparently the best time to visit the restaurant is at sunset, when a jazz singer provides the soundtrack to sunset and sangria. I can only imagine how magical that must be. The caves themselves are small and quickly looked around, although it is rocky (obviously) and probably not for anyone younger than Sachin (3 and a half) or too old either.