Vilabranca always tend to get good reports, although I don't know of anyone who has stayed there recently; they're about a fifteen minute walk from the town centre (twenty minutes back as it's uphill part of the way). Porta da Vila apartments are situated much closer to town than Vilabranca and are, in fact, within the town walls, close to the Red Cross building. Almost opposite the Red Cross is Casa Paula, a small complex of half a dozen apartments set round a small pool. These used to be marketed by The Travel Club of Upminster when we used them.
Other alternatives are the Marina Club apartments which, as the name suggests, are on and close to the Marina, and Marina Park ( recently re-named Vita Sol)which are set on a hill about half a mile behind the Marina. Should you find other apartments which appeal, I'll be happy to try to help with location as some of the descriptions regarding location can be a bit vague.

my wife and I have stayed at Villabranca Apts several times and I would highly recommend them. They are an excellent location for self-catering as there is a min-supermarket about 2 minutes walk across the road. They are divided into 2 bloack of apartments both of which have their own swimming pool. There is also a bar and restaurant should you need them. However it is far cheaper to get the stuff from the mini-market. Just further doiwn the road from that shop is a great cafe the "O Pinguin" which serves home made pizas. I normally don't eat the stuff, but from here....its well... much different. make sure that there aren't any footie matches on when you go as the locals support Benfica, and it can get a little noisy. 5 minutes walk down the road are several restaurants, one of which I recommend is the Triangular.
You may find this website of interest. The owners of the site used to own an apartment in Villabranca and may still do.
http://www.simplylagos.com/

I wrote this back in October last year,
These apartments situated very close to the city wall, (we stayed there many years ago) when I walked passed them last week were empty and there was a lot of for sale signs. I have noticed them in a Thomsons brochure for 2010 so I would excercise caution if you were planning to book.

Things may probably have changed since then.

HI
thanks everyone for their info, I have booked to go back to the old faithful Greece, trying Kos this year.
Found the Algarve holidays were very pricey this year.
M