Ludlow is really quite small, and so getting around by foot is suggested, although to visit many of the surrounding areas of beauty and villages, a car will be necessary, as public transport in rural England is generally sporadic.
Ludlow market sells a wide range of foods and local products, and runs on Mondays, Wednesdays, Fridays and Saturdays in Castle Square
Ludlow festival  runs each year in June and July and has a wide programme of events, including a Shakespeare play performed in the castle grounds.
Ludlow assembly rooms  also hosts films and various other plays, workshops and performances.
Ludlow Medieval Christmas Fayre (Ludlow Medieval Christmas Fayre), Ludlow Castle, . Saturday 28 & Sunday 29 November 2009 Savour the sights and sounds of a medieval fayre in the glorious setting of Ludlow Castleedit
Ludlow has a number of small independent food shops- including both old fashioned butchers and bakers, and more specialist shops selling up market, strange or health foodstuffs.
Since Ludlow's tourism is expanding, there is a larger range of shops selling all sorts of trinkets and knick knacks. Try the silver pear for cool designerish looking things with no discernible purpose which are nevertheless very expensive and desirable. The bookshop on castle square also comes highly recommended, although it is small.
Again, Ludlow market.
A wide list of shops and businesses in Ludlow is available here- 
Ludlow apparently has the highest number of Michelin starred restaurants anywhere in England outside of London. I can't vouch for this, never having enough money to afford to go to one. Nevertheless, Ludlow is bursting with nice looking places to eat, and probably the most rewarding thing to do is to walk around (it's really not that far) until you find something you fancy.
Ludlow is a small and quiet town, and so does lack cheap accommodation. There is a Travelodge located on the eastern outskirts of the town, by the A49 bypass at Foldgate.
Ludlow tourist board offers a fairly comprehensive list of places to stay 
The Bringewood, Burrington Ludlow SY8 2HT, ☎ 01568 770 033 (firstname.lastname@example.org), . checkin: 2PM; checkout: 11AM. Renovated Victorian farm buildings (est. 2006) in 250 acres of beautiful English countryside. 11 ensuite rooms with modern touches blended in with the tradtional building. Unique accommodation for people who want something different. With 2 lounge areas to relax and enjoy the stunning views or the large wood burning stove to keep you warm during the winter. Restuarant offers high quality meals in a relaxed, informal atmosphere and caters for intimate meals for 2 as well as weddings, civil ceremonies, business conferences, private functions, team building days and corporate events. Near the market town of Ludlow; famous for its Michelin star restaurants, Shakespearean plays, food fairs and local farm produce.£75+. edit
Around Ludlow area, there are a great many places of great natural beauty, and the hills of Shropshire are great for walkers or cyclists. Try the Wyre forest , which has a number of different walks for people of different abilities, and also sculptures etc handily placed on the paths to stop it from getting boring. You could also try walking around Clee hill, which has great views and sheep.
Ironbridge is a great place for a day out (The Tar Tunnel is recommended.)
Visit nearby Craven Arms  to go to the Shropshire Hills discovery centre or Acton Scott Historic working farm (both great for kids), or Harry Tuffins' one pound aisle.
A number of larger towns with many things to do in them are within driving distance of Ludlow - Shrewsbury, Worcester, Birmingham, to name a few.
For a fuller list of local attractions, Ludlow has a good tourist information centre.