I am lucky enough to actually live in Niagara Falls, Ontario, so I see the falls all of the time. I have a family, so we do partake in the attractions here and there are some things that you need to know in order to enjoy your time here.

Lodging:

Clifton Hill is the key area if you are traveling with a family. If it is just you and your significant other, you might look at the Fallsview or one of the other major hotels that overlook the falls- anything connected to the Casino is going to have a view of the falls. The Great Wolf Lodge and Americana are excellent family stays but are not on or near the falls and have no view thereof. Good deals can be found especially in March and April, and September and October which are off peak. They both have websites, check 'em out!
The Great Wolf Lodge is actually the best place to stay with a family, we stay there during the winter months when they have really cheap rates for locals.
The reason for recommending Clifton Hill is that is right in the centre of all the action. All of the attractions for the falls are on or close to Clifton Hill. If you are a hotel guest, you park for free and my best advice is to leave your car where it is and either walk, cab or bus around town. Nothing is really too far to walk. Parking is very expensive down at the falls, and you have to pay to park no matter where you go.
If you stay off the beating path from the Clifton Hill area, visit the Skylon Tower, and park there. The Skylon is a must see. There is a huge arcade in the basement, with a food court, and the ride to the top is amazing and the view = stunning. Bring your camera! You have an unobstructed, 360 degree view of all of Niagara Falls from the top. The food at the Skylon is good, but not cheap! I suggest the early bird dinner if you want some finer dining, and if you are dining with children it is better to get seated between 4:30-5:00 to eat. If you have teenagers who are more self sufficient, give them 40 bucks each, that is 25 for a roll of tokens, and 15 to eat, and you can have a nice quiet dinner upstairs while they have a blast at the arcade/bowling alley in the basement!

Clifton Hill:
This is where most of the touristy stuff and amusements are located. The Sky Wheel is the biggest ferris wheel I have ever seen. The cars are enclosed and are air conditioned in summer and heated in winter. It is not cheap to ride, but boy what a ride it is! ESPECIALLY at night when the falls are lit up! Clifton Hill looks like a midway- there is a Guiness Records museum, a Ripleys museum, a 4-D movie theatre, a monster / haunted house, an arcade or two, a wax museum, and of course there is a Hard Rock Cafe, a Rainforest Cafe, and Planet Hollywood to name a few of the restaurants in walking distance. There is also a Wendys, a Burger King, a Tim Hortons, and a hot dog stand for cheaper fare. You will find that all the food, and all of the souveniers are severely marked up on Clifton Hill. The further you get from Clifton Hill, the cheaper the t-shirts, and the coffee mugs get.

The Falls:
Bring your camera and plan to fill your SD card! Be sure you have back up batteries or that your camera is fully charged- batteries will cost you a mint if you have to buy them at the gift shop on the falls.
There is always "spray" from the falls, especially horseshoe falls. Bring an umbrella or you will be wet. In the summer, you dry in the sun, but if you go inside right after standing on the observation deck, you will be uncomfortably cold. The falls light up at night- it is amazing to see- and there are fireworks- these things are seasonal so you have to check on times. The falls lighting does not come on until 8:30-9:00 at night. There is alot of green areas and park benches where you can set up a nice picnic. In the summer and fall, before October, the parks across the street have beautiful rose gardens.

Tourist Trap:
Yes. It can be if you fall prey to it. You can do Niagara Falls on a budget. Be careful about parking. The small lots that allow you to park for "$5 Bucks for the day!"- be careful- you are probably a mile from where you want to be. Food on the "hill" (Clifton Hill) is much more expensive than if you go a little farther away from the actual Falls area. (Here's just a little tidbit, if you like Indian food, you are not going to find any good Indian food anywhere in Niagara Falls, at all, period!)
Souveniers are almost half the price if you go shopping on Victoria Avenue. Remember that- and Victoria is walking distance from the hotels on the "hill".

Traveling with children- read on:
There is a place called "Zooz"- it is in Stevensville, which is about a 10-15 minute drive from the falls. It is a wonderful little zoo, with monkeys, lions, giraffes, prarie dogs, moose, elk, deer, and many more animals to see. They also have a "splash pad" so be sure to bring bathing suits and towels. You can pack a lunch or eat at their snack bar- hotdogs are good- their chicken nuggets are terrible.
There is also a nice big play ground there with plenty of places to sit down, and there is also a petting zoo. You can rent a wagon for just a few dollars- it is worth it! Also pack several bottles of water- there are no water fountains conveniently located around to refill. If you get thirsty and have no water bottles, you have to buy bottles of pop or gatorade and they are $2. You have to do A LOT of walking so wear comfortable shoes. Wear a hat and shades too- you will need it!
There is a nice gift shop- prices are reasonable which is good since you HAVE to walk through it to leave the park!

If you are in Niagara Falls as a couple- without children, plan to go on a wine tour up around Niagara-on-the-Lake. It is beautiful. If you play golf, the oldest golf course in North America is in Niagara on the Lake. Also plan to see the Welland Canal Locks. These things can not be enjoyed as a family with small children.

If you are in Niagara Falls, do not miss Marine Land! It is a must see. It is much like Sea World, just on a slightly smaller scale. The price of admission is a little steep, but it is well worth the money. You will see dolphin and sea lion shows, killer whales, and the "Arctic Cove" Beluga Whale encounter is wonderful. There are alot of rides for the kids- from ages 3 and up. The Sky Screamer is not for the faint of heart. In fact, I do not recommend it at all unless you like those "yank you up to the heavens and drop you free fall style" type of rides. My daughter, 8, wanted to ride it, insisted on riding it, and once we got on it, she cried and cried, it scared her to death- she has not been the same since!

The Bottom Line:
Niagara Falls is touted as a honeymooners paradise, and it is... but it is also a wonderful place to bring your family. There is much to do and see. If you plan to fly in, I highly recommend flying in to Buffalo in order to get here, not Toronto. It appears to only be an hour or so from Toronto, it is NOT. It is a 2 hour drive through heavy traffic- fly in to Buffalo, trust me!
(Make yourself aware of the new border crossing rules before traveling!)

Recommended: Yes

Best Suited For: Families
Best Time to Travel Here: Mar - May