Gokarna is definitely the most touristy place I'm including in my guide to India. Fifteen years ago or so, it was fairly obscure (I visited first in 1999 and again in 2011), but now it is firmly on the backpacker's circuit. However, many people don't know about it simply because it gets eclipsed by the even more popular areas further north in Goa State.
If you're looking for Arabian beach paradise, with amazing beaches, beautiful sunsets, fellow travelers...but without the pounding techno music, drunken idiots and swarming crowds in nearby Goa, then Gokarna and its nearby beaches is the place: Kudle Beach, Om Beach and Paradise Beach, all of which can be accessed by a walking path from the village of Gokarna, or else by rickshaw along a road that goes behind the beaches.
The bus drops you off near the center of town. If you wish, you can find a place to stay in town. But the better idea is to get yourself out to one of the beaches, where there are plenty of beachside huts or rooms.