I spent a week there. I arrived the day that the tsunami hit, but the island is protected by Sumatra and we saw nothing from it.
I flew from Taiwan (I was already in Taiwan at the time), so it wasn't too bad. One of my friends flies from Los Angeles to Jakarta to get home, and she usually flies through Hong Kong. I imagine that's not so great.
I had fun in Bali, but I probably wouldn't go back. We got a great deal on an all-inclusive hotel-flight thing and stayed in some really, really nice hotels. Not like 5 star Western places; they were a lot more local but very nice and well served (made us feel like royalty).
Outside of the hotel wasn't as great. It's a tourist based economy, so you're going to get that feeling like you're constantly being screwed. I mean, in US dollars it translates to like a dollar here and there and it means very little to us and more to them, but it's not a nice feeling. Even the money changer at the airport "miscounted" and tried to short me for about US$30. I usually feel most safe with money changers in Asian airports, so that surprised me a lot.
I swam a lot, we went river rafting (that was really nice), and I went surfing. I'd say the local surfer crowd is very friendly, down to earth, and inviting there.
Shopping was a lot of haggling which is to be expected. I got some cool stuff at a good price (I'm sure the sellers were happy with the price I paid too). There are tourist streets and a lot of guys pushing drugs pretty heavily. It's a little bothersome, but not the worst I've encountered.
I wouldn't worry about the terrorist crap. Most of Bali is Hindu (or something else?)... it's not Muslim like the rest of Indonesia, and the people are very vocal about hating terrorists. I mean, it messed with their economy pretty badly so it's to be expected... or maybe they were just saying it for my benefit.
Overall, it was okay. I think there are better places to go, though, and I probably wouldn't return without good reason.
Good luck!