I grew up on the Cape and still consider it home (Falmouth). There is quite a bit of entertainment all along the Cape (as mentioned before, theater, baseball, swiming, restaurants, shopping -- additionally, there is a great bike path and there is a marine biological lab in Woods Hole that has some hands on activities for kids).

If you like to run, there is a 10K every year (that is very tough to actually get a number for) in Falmouth and there is the Cape Cod Marathon. It is also pretty easy to get off Cape if you decide to go into Boston for a couple of days (or even a day trip). Directly from Falmouth, there are two passenger only ferrys that travel to Martha's Vineyard and as mentioned in another post, the Steamship Authority can get you to either MV or Nantucket with or without a car (although personally, I wouldn't recommend taking a car onto the Islands unless you are renting a place for the summer or are staying way off the beaten path). On the Vineyard, you have the possibility to do some celebrity watching (everyone from Carly Simon to The Clintons to Dan Ackroid). If you are interested in surf, the Outer Cape is probably the best bet (Outer Cape is also called the Lower Cape).

My one warning for rental houses is that (at least in our area) they tend to go quickly so there might not be any guarantee that you can get a place for this summer exactly where you want to stay.

We do have some jellyfish issues in August when the water warms up but nothing fatal and usually the lifeguards carry meat tenderizer in their first aid kits (takes away the sting).

The Bay side is freezing!!! I have family who rent houses on the Bay side and we actually have contests to see who can withstand the water temperatures the longest (without having to be rushed to the ER ).