Has been one of my favourite destinations in Brazil. It is right on the point where Sao Paulo Estate meets Rio de Janeiro Estate.
There are various islands in that region.
When you arrive in Paraty you will probably want to look for a "Pousada" - which is like a hostel but many of them are quite sophisticated with swimming pools and a large varanda area.
They normally serve a huge breakfast til around 11am.
I like Paraty for its old colonial village style. You will be safe there at all times, the local people are poor and hardworking.
The main thing about Paraty is that the main beach is actually not where people like to stay. The boat rides are very popular and you can have a boat for as long as you like depending on how much you are willing to pay - of course.
If you like eating loads and dont want to spend too much you would like to consider getting to know the local fishermen and asking where and if they have a restaurant or bar somewhere - it will be something simple but certainly lovely fresh homely food and they are very generous with the portions.
Every time I went to Paraty I had to find my own way around as to food because some of the restaurants are expensive and offer exactly what I can have in Europe - so I always try to befriend a fisherman and find out from him where is the best place to eat!
If you don't speak any Portuguese and you are not sure about going there on your own - try and find a hostel called Pouso Familiar - the owner is a Belgium man who married a brazilian lady. He speaks most european languages as far as I know. But as far as I know in other pousadas there are people who can speak some English.
If you go there you must also take a day to visit a farm where they produce the Brazilian Rhum - popularly known as "Pinga" or "Cachaca". The prices vary but also the proceedure in making the "liquid" is interesting finding out from them.
Do visit waterfalls in the region, the "farol" which is up on a mountain northside of Paraty. It is a nice little walk up the hill. And you can walk down on the rocks to view the sea on the other side of it.
Historically, I'm afraid there is nothing much left in the place - which poses as a museum.
The night life is quite relaxed - there are bars where there is Brazilian Pop Music on all night.
There will be events going on at the theatre, or the main square around the church and lots of handcraft markets.
Visit Trancoso beach. I have never been but it is nearby and everyone says it is beautiful.
Review added 17 September 2009