Tahoe City itself is walkable — the main street, the beach, the Fanny Bridge, and the marinas are all within a few blocks. A car is useful for getting to the ski resorts and to the more distant lakefront state parks.
TART (Tahoe Area Regional Transit) buses run year-round around the north shore: Tahoe City to Truckee, to Kings Beach, and seasonally to the ski resorts. The free Night Rider runs evenings in summer. Schedules thin out in shoulder season.
Cycling is the best way to see the immediate area in summer — the Truckee River Trail and the West Shore bike path are paved, scenic, and avoid the highway traffic. Several rental shops in town will deliver bikes to your accommodation.
Driving is straightforward but parking in town fills up on summer weekends and holidays. Use the free public lots near the Y intersection and walk in.