Faro is the capital of the extremely touristy Algarve region. It is also the location of the main airport for the area. Most of the worst package holiday excess is actually based in other towns however. This leaves Faro as a moderately unspoiled historic blah blah blah...
Basically Faro is a nice enough place to spend a day if you've arrived by the airport, or if you are passing through on the way from Seville to Lisbon and have time to kill. The old town is quite pretty, and the tourist office will happily provide you with a map and a leaflet. The walk described on the leaflet will get you round the main sights within a morning, leaving the afternoon to get the bus out the town beach, which is located miles out of town past the airport. There are a few bars in the city centre to spend the evening in, although in the winter at least none is particularly lively. There is even a club. The main hostel is okay but nothing special if you need to stay a night afterwards, otherwise just get the night bus or the first train onwards to somewhere more interesting.
If you want to spend real time on the Algarve, head for somewhere cooler, like Lagos.