Venice Beach, aka "Muscle" Beach is a great place to take your children (or yourself) if you feel like you have lived a sheltered life. From the homeless tents, to the different types of people, you will find it very eye-opening. It is called "Muscle" Beach because there is a section with outdoor weight lifting, basketball, hand ball, skate board park, etc... We rented bikes, and went up and down the strip.
ETIQUETTE TIP: When biking, if you are going slow, stay to the right. If you need to pass people, please do so on the left. Also, people are not aware of their surroundings, which I consider a breach of good etiquette - a lot of people were walking in the bike lane. It made it a lot harder to bike since you had to dodge pedestrians.
There are also a lot of little t-shirt type shops, and vendors set up selling unusual items. And yes, you can actually lay out on the beach and enjoy the water and sunshine.