South Venice Blvd, Venice

Venice used to be a little sketchy until about five years ago. Now, it is my favorite neighborhood in the city; and, is widely considered the coolest and most vibrant. The beach isn't exactly clean but you can still lay out / play volleyball, etc. The people watching is fantastic, though! Venice still has the greased up muscle heads from the days of yore lingering around; and, there are still definitely a high percentage of drug weirdos, hippies and crazies to get a look at on the boardwalk. But, since the neighborhood has come up, there are also a ton of young people, hip people, beautiful people, yuppie people, et al.
Figtree cafe is right on the "boardwalk" and it is an amazing place to go for lunch / brunch / basically any time. It has pretty good food and you can sit outside, soak up the rays, drink beers and people watch for hours. It's one of my favorite places to be on a Sunday afternoon. James Beach is another great brunch spot: they have fabulous Bloody Marys and a beautiful crowd but there is no outdoors and it's a block inland. High at the Hotel Irwin just opened and it has an incredible view of the water and great music.
Living here is a bit pricey nowadays but so worth it. There are walk streets in the canal area of Venice that are so darling. There are all these little bungalows surrounded by trees on tiny pedestrian streets and people are always sitting on their porches or bbq'ing. It's the epitome of Southern California living.
A few blocks inland, Venice also has great shopping (Abbot Kinney) and a pretty vibrant nightlife (in and around Abbot Kinney). The neighborhood has everything and as far as west side neighborhoods go, it's pretty central.