Lisbon's Alfama district has the most character but is hilly; Príncipe Real and Santos offer trendier options. Porto's Ribeira area puts you on the river; Bonfim is a up-and-coming neighborhood with great local cafes.
The Algarve's resort towns (Lagos, Albufeira, Tavira) have accommodation for every budget. Alentejo's rural guesthouses (casas de campo) and wine estate hotels are exceptional for a slower pace. Portugal is excellent value — equivalent hotels cost 30-40% less than Spain or France.