Serious backpackers go to Utila from all over the world. I met many people from Canada, UK, Italy, Switzerland, Holland, Spain, and Israel. Surprisingly, because it's so close, I met only two people from the US.
Because Utila has the cheapest diving courses in the world, many people stop off to take the 3-5 day Open Water course (which ranges from $119 at Paradise Divers -- see below warning -- to $159 at Bay Islands College of Diving). Turns out that everyone I met who decided to take the OW course ended up staying on the island for about four months. Many of the courses offer free housing or other freebies, such as free dives. If you take a course that doesn't offer free housing, it's ok because it is very easy to find a place with a public kitchen for $2 a night.
There isn't much to do and it's very hot during the day if you aren't going to dive, so pick your dive shop carefully. On the main strip, which is about a kilometer long, there are about 30 dive shops (and two internet places, two places to rent bicycles, one ice cream shop, about five Western restaurants and about 10 local restaurants/stalls).
On your first day, you should probably walk up and down the street and choose your dive shop depending on where you want to dive (whether north dives are important), and other issues, such as whether you need a/c classrooms, whether you want free dives or free rooms, whether they offer continuing education, and the vibe of the employees in the shop. But, most importantly, check out the equipment and the boats to make sure they look safe. There are some outfits that are super cheap but obviously don't look too safe, such as Paradise Divers, where they take people down to 150 feet and take pride in the fact that they never open on time b/c they're so hung over. I got my Assistant Instructor at the Utila Dive Center, which is an institution on the island and therefore a safe place to dive with daily dives to the North Side. But, my instructor (Marc Sofer) sucked and was mean and provided my only annoyance during my 2 1/2 weeks on the island. However, John Fraser, the head divemaster, is excellent, kind, cares about your entertainment and finds the fishes, such as the sea horses.
If you dive on the north side of the island, you would leave on the morning dive, which, depending on the dive shop, leaves from 7:30-8:30 in the morning. I always dove on the north because the WHALE SHARKS, when they are found, generally are on the north side. Schools of DOLPHINS can be found anywhere.
I saw three whale sharks during my 2.5 weeks, which ranged from 20-30 feet long. Giant schools of tuna follow the whale sharks. When the tuna surface, it looks like hundreds of bubbles on the surface. So, the boat captains, and whoever else wants to, looked for big bubbles in the surface while we headed to our dive site. When we found the tuna, we waited for the whale shark to surface. When it did, the captain yelled for us to jump, and boy did we jump. My only injury was a kick to the head. The whaleshark tends to swim for about 10 seconds until it goes under. However, on my final swim, the whaleshark swam right with me for about six minutes. Intense.
A standard day is going diving, then having lunch, then taking a siesta, then waking up for sunset at Coco Loco's and having a few cocktails there, then dinner, then you go to the bar that's having a party night. The nights are as follows: Monday and Wednesdays, you go to the bar at Cross Creek; Fridays at Bar in the Bush (which is the only local bar that the backpackers frequent); and every other night at Coco Loco. Once you get to know people, you'll also learn of the house parties.
I originally stayed at a place called The Mango Inn. The Mango Inn is associated with UDC, so my room cost $5 a night. It costs more at Mango than at other hotels because the Mango offers a range of rooms -- a/c, shower, etc. and a restaurant that is known for its fantastic pizzas. I had to leave after 5 nights, however, because (a) the screens in my room had holes in them and I had the choice to either suffocate in the heat or get bitten up by sand flies all evening, (b)I had bed bugs, and (c) they never cleaned my room or changed my sheets from the person who had my room/bed before me. I moved to Ruby's Inn, which is on the strip and my room had views of the ocean. I paid $20 a night for a clean a/c room with hot showers with daily maid service.