Hi Lizzie,
I think Albufeira is about 40 kilometres from Faro airport. The journey takes about 30-35 minutes. You can find quite a good map to give you an idea of where the various resorts are at
http://www.thevillaagency.co.uk/map.php. There are lots of smaller resorts right along the coast, particularly around Albufeira and between there and Lagos. It all depends what you want really. The beaches are fantastic anywhere!
If you know nothing about the Algarve it would be a good idea to go in to a travel agent and pick up lots of brochures, from which you'll be able to get an idea of where you might like to stay. But bear in mind it's nearly always cheaper to DIY it.
If you have any particular likes and dislikes post again and we'll all pile in with our recommendations!!