We have lived in Salamander Bay, a suburb of Port Stephens, for about 9 months now. Although the term Port Stephens actually refers to the waterway, it is the most common collective term for the many suburbs that surround the inlet. The southern aspect (where we live) is also referred to as the Tomaree peninsula; and by locals simply as "the bay". It is a quiet area, except on school holidays and long weekends, as it is a popular tourist (and retirement) destination for Sydneysiders. It is 2.5 hours north of Sydney, a little over 1.5 to the Hunter Valley, about 45 minutes north of Newcastle, and 20 minutes from the Newcastle Airport at Williamtown.
There is a local bus service, but it is limited, so it's best to have a car. We like to start our tours at the Gan Gan Lookout, up Lily Hill Road (turn at the white whale). Because its shows a 360 view, it's the best way to get acquainted with the area. You can see down the port past Soldiers Point through to the inlet between Yacaaba and Tomaree heads, as well as the open ocean and stockton sand dunes past Anna Bay towards Newcastle.
Soldiers Point to Nelson Bay is all flat, protected water. There is an active marina at Soldiers Point, and water access along the road throughout the area; some are a bit marshy in low tide - but still great for kayaking or stand-up paddleboarding. The beaches near Nelson Bay are Bagnalls, Dutchies and Little Beach. There is excellent scuba diving and snorkelling off Fly Point as well.
Nelson Bay has shops and restaurants scattered across the bay-side village, and a good visitor information centre; it is the hub for tourism. The tourist info centre also has a handy booklet (Bushwalks around Port Stephens) for those interested in doing some exploring of the Tomaree National Park, wetland reserves, or any of the other hikes (bushwalks) in the area. The lighthouse has a nice view, a small museum, and fabulous tea house for a cuppa or a light meal.
My favourite view is from Mount Tomaree. In under a half an hour you can climb the southern head of Port Stephens, which has a well developed trail and stairs. The mountain was initially developed as a military outlook during the second world war, and there are a few gun emplacements and other evidence of Fort Tomaree that remain, but I think the view is the best motivator for the climb. There is a nice view of Shoal Bay and Nelson Bay; a great view across to the northern side of the port (Yacaaba Head, Tea Gardens, Hawks Nest); lush islands in the ocean; Zenith, Box and Wreck beaches towards Fingal Bay; Fingal Island and lighthouse; and a distant view of the Stockton dunes.
Fingal Bay is a nice, family friendly beach. It is a semi-protected bay, so there are areas with calmer water, but also some small to medium sized waves for body boarding or beginner surfers. There are surf-lifesavers on patrol, and a new club will be opening soon. The area between Fingal and Boat Harbour is all part of Tomaree National Park; there are plenty of nice trails through here with great views, such as Big Rocky (consult the bushwalking guide).
Another great spot to view the open ocean (including the whale migration) is Boat Harbour, Fishermans Bay, and Anna Bay; Morna Point is spectacular. One Mile Beach is somewhat protected, and is great for surfing (especially beginner and moderate). Birubi Beach is awesome. There is nothing but 32km of sand between there and Stockton Beach, in Newcastle. The surf is larger here, and there are always experienced surfers and kite-surfers taking advantage of the consistent (and big) swell. Both Birubi and One Mile are patrolled. Stockton dunes are accessible by 4 wheel drive; there are various guided tours, including activities like sandboarding and camel rides.
Port Stephens is also a great place to watch dolphins, and whales (during migration). There are dolphin cruises (year round) and (seasonal) whale watching tours; you can bundle tours to do a dolphin cruise one day, and a sandboarding tour the next (for example). However, there are so many dolphins around that you will probably see some without doing a tour- especially on the ferry between Nelson Bay and Tea Gardens. It's a pedestrian only ferry (bikes are also allowed), but there are nice short walks, including going to Jimmy's Beach in Hawks Nest. There is excellent fishing as well - basically any and all water sports are done in Port Stephens.
The inland area is speckled with farms, most of which sell their produce (or eggs, nuts etc) directly from the farm or at a roadside shop. There are a few local wineries, and Murray's Brewery - a cute hillside brewhouse with award winning beers and decent menu for snacks or lunch (kitchen closes around 4). Murrays has recently opened a full pub in Manly which we visited in September, and confirmed that it is just as tasty in both locations!
Kangaroos and koalas live throughout the area; particularly in the national park (and on Nelson Bay golf course). There are many tropical and oceanic birds (even penguins) to watch and listen to as well; our favourite is the kookaburra, who routinely laugh at dusk and dawn. I could go on, but the long and the short of it is that Port Stephens is an amazing place for anyone who appreciates the outdoors. What it lacks in night-lift, it makes up for in stunning nature... and I feel lucky to be living here right now.