Tiwi Villas is a sort of cross between a cottage complex and hotel. We rented a small, very basic cottage with two very large double beds (in two separate rooms) with mosquito nets and a bathroom with toilet, shower (water is a bit salty) and sink. We paid KSh1500 (£15 / $22.50) per night between us for the cottage and they let all six of us share,which was important on our budget (we'd been in Kenya for three months at this point and were travelling after finishing teaching placements).
We were thrilled to be able to stay in such a gorgeous place for £2.50 each per night. When we walked out of the cottage door we had a view over the sparkling blue and turquoise water.
The complex was always quiet, and at any one time there were only about 10 other people staying there. It also has it's own small swimming pool surrounded by (not all that comfortable) wooden sunloungers, which is good if you don't like swimming in the sea.
Tiwi Villas has a little bar and serves food all day. The food is very reasonably priced, the lady in the office is very friendly and Edward (the barman) is helpful - once you get to know him. The frequent power cuts are more amusing than annoying, but a torch is very useful because there are no street lights for miles around.
The one downside to the beach and Tiwi Villas is that recently there has been a bit of a problem with thefts of money from rooms. Don't let this put you off, just make sure that you hide your moneybelt really well (in your rucksack or other luggage).
It's not the kind of place for families, but if you're on a tight budget you can't really beat it. This was one of my favourite places in Kenya - but watch out for the monkeys.