The New York Times, our parent company, has an incredible section of their website focused on Phuket as a travel destination. They recently named Phuket Island their "Luxury Destination of the Year."
Phuket is one of those places that has something for absolutely everyone. It's much more family-friendly than somewhere like Pattaya. The beaches are prettier, cleaner, and the snorkeling and diving is amazing off the coast.
Phuket is one of my favorite places in Thailand to visit, and I've even lived there for a few months when I first arrived. If you want to pamper yourself there exists the infrastructure to do it. There are some ultra-modern hotels and spas available, and more islands to take a private boat out to than you can count. If you don't want to spend all your money you could venture onto Phuket's side-streets you'll be met with locals at food stands and clothes stands selling their goods at a nice discount.
Photo credit: mst7022 at Flickr