It is a tiny island just off the coast of South West Gujarat and has some of the best beaches on the western coastline. The Nagoa Beach in particular, is a scenic beach. It is quite outdoor friendly and you could try water sports, camel ride or just about sun bathe any time except monsoon.
Like most of the state of Gujarat (thought it's technically a tiny separate union territory), Diu is pretty far off the radar for foreign tourists in India. A one-time Portuguese garrison town and trading port, it's a sleepy place whose colonial history shows especially in its food and the pastel architecture of its splendid Old Town. Beyond the aesthetic and historical considerations, Diu is where Gujaratis stifled by the prohibition on alcohol in their home state come to booze up and hang out on the beach (as a Union Territory, alcohol is allowed in Diu). And while the beaches here aren't the most amazing you'll see in India, it's also a spot pleasantly off the main tourist treadmill, and a great place to rent a scooter and explore.
Diu is one of my favorite places in India. It is popular with Indians, especially from neighboring Gujarat, but few foreign travelers make it here. Indians mostly come here for the alcohol and beaches, but foreigners will find this former Portuguese colony interesting for its fort, architecture, cleanliness, cultural makeup, bird-watching, scooter-riding, traffic-free streets, and more.