Two forms of currency are accepted everywhere in the Caymans: American dollars and Cayman Island dollars. The exchange rate is fixed and unvarying: $1.25 US equals $1 CI. Any time US dollars are used change is given in Cayman dollars. Prices may be quoted in $ US or $ CI or both.
This provides a very convenient system, at least to Americans, as it avoids all transaction fees for converting currency. But it has a second effect that shows up, particularly at restaurants, where prices are always given in $ CI. As you peruse the menu, prices don't seem out of line with what you're used to seeing. It's only when the bill comes and you recall the 25% premium for Cayman dollars that you realize, yep, that was expensive.
One other thing: Most restaurants automatically add a 15% gratuity to the bill. If the service was great, you may want to add on another couple of dollars - but don't make the mistake of adding an 18% tip when the establishment has already taken 15%.