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The Cayman Islands have a public transportation system, but it really isn't anything special. The buses run on time usually, but they aren't exactly spotlessly clean, and the drivers can sometimes be a little erratic on the road. The buses run on set schedules, but they do have certain holidays of the year off.
The cost to ride the bus isn't too bad, and it is a choice that many locals take. Many of the larger hotels and resorts also have vauchers for the bus system, or have their own shuttle service. The buses are definitely a good alternative to taking taxis everywhere you go, as this will save you a lot of money in the end.
Also, many of the activities and sights that you would want to see are far away, so taking the bus is a good alternative to having to walk all over the island, which just isn't sensible. You could rent a scooter or a bike, but you'll still have to go long distances, and the islands are built up enough so that you would be on main roads a lot of the time.
A trip across to another island isn't a bad idea, but aside from a private charter, Cayman Airways is the way to get from one island to another. The prices are a bit more expensive, and it isn't really a good idea to be coming and going that often.