Hydra's eating divides roughly into three: the harbour tavernas (busy, touristy, decent grilled fish), the village places hidden up the lanes (cheaper, more genuine, often run by the same family for decades), and the destination restaurants at Kamini and Vlychos (a long lunch by the sea, worth the walk). Standards are generally good — the island has been tourist-savvy for sixty years — but you pay for the location, especially on the harbourfront.
For seafood, Techne and Omilos at opposite ends of the quay are reliable. Kodylenia's on the rocks at Kamini is a long-running favourite for lunch. In the village, To Steki above the harbour serves traditional Hydriot dishes — amigdalota (almond sweets), rooster cooked with pasta, slow-stewed goat — at locals' prices. For the freshest fish, follow the small boats from the harbour at dusk and eat wherever they unload.