The problem in Praia da Luz in my experience is that the restaurants there are geared, naturally, to the tourist trade and prices reflect this accordingly. In fact, there are few traditionial typical "cheap and cheerful" Portuguese restaurants in Luz.
There is at least one chinese in Praia da Luz.
If you have a car, I can suggest a couple of places in Lagos, (5km away):
Restaurante-Cafe Ate Qu´Enfim, Behind Intermarche in the Upper Town.
As you enter Lagos from Luz, go through the first roundabout, (A22 motorway access), then turn right at the next. Take the second turning on your left and after about 500m on the right you will see the restaurant.
Another great place in Lagos, especially if you have kids, is Pizzolino's.
See: http://bit.ly/ddcoJk
There is also a restaurant halfway betwen PDL and Burgau on thr right called O Malhão. I understand it is quite good but have not checked the prices recently.
See: http://bit.ly/cVvuxC
