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Where to be in the Algarve, Portugal

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My wife and I are considering a trip to Portugal in late summer, 2013. We are taking our 2 children, 13 and 16. Although we will want to see a few sights, this is to be primarily a beach holiday.

I understand that the Algarve area is very desirable for this type of holiday. Can anyone recommend accommodations for us? Our budget is up to $300-$350 per night. A hotel on the beach would be preferable, but I don't know if that is possible, or which hotels or what specific area to start with. Also, we may travel with another family, with children, so a villa would also work.

Any ideas on where to start looking for a suitable place to stay, as well as things to do while staying in this area?

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