Gracetown is a small coastal settlement north-west of Margaret River town, set above Cowaramup Bay and surrounded by surf breaks. It is quieter than Prevelly and less polished than Dunsborough, which is exactly the point; the village feels like a beach community first and a visitor stop second.
The bay can be good for swimming in calm weather, while the outer breaks are for experienced surfers. Even if you are only driving through, stop at the lookout for the view over the curve of the bay and the limestone coast beyond.