The old town is small enough to walk end to end in 20 minutes. Most cafes, guesthouses, and sights inside the walls are within easy walking distance of one another.
Bicycles are widely rented from guesthouses and bike shops along Renmin Lu, from around ¥30 per day. Cycling around (or partway around) Erhai Lake is one of the classic Dali experiences — a complete circuit is about 130 km, but most cyclists do the western shore from the old town up to Xizhou and back (around 40 km return), which is the most scenic section.
Electric scooters are also rented to foreign visitors; they make Erhai Lake circumnavigation considerably more comfortable. Be careful — the lakeside road is busy in summer.
Buses and shared taxis run frequently between the old town and Xiaguan (the modern city, about 15 km south), where the long-distance bus station and the train station are located. Bus 8 connects them for ¥3. Buses also run to nearby villages around the lake — Xizhou (¥6, 40 minutes), Zhoucheng, Shuanglang.
Didi (the Chinese ride-hailing app) works in Dali; you will need a Chinese-linked payment method.