My favorites are in Carmel and Pacific Grove:
Carmel:
Katy's Place (breakfast)
Tutto Mundo Trattoria
Little Napoli
Hog's Breath (do NOT eat here, only go for drinks. Fun since it used to belong to Clint Eastwood)
Pacific Grove:
Red House (breakfast/lunch)
Toasties (breakfast)
Fandango
Passionfish
Vito's
Do NOT eat at Lattitudes on Lover's Point. We went there for dinner one night as it was recommended by the hotel where we were staying. We were virtually ignored and ended up leaving. (Plus the menu wasn't very impressive). Too bad as the location is very nice. We ended up going to a wonderful family run Italian restaurant (Vito's).