The best diving and snorkeling in Albufeira is at PraiaPraiado Evaristo beach. Alternatively, you can go to the Indigo Divers dive center - even if you're a beginner, you can take a training course from them.
If you want to sail a kayak in a maze of sea caves or spend a couple of hours on catamarans, go to Dolphins Driven. Another original type of water entertainment in Albufeira from this company is motorboat races with dolphins (departing from Albufeira Marina).
On Praia do Oura, you can go parasailing and water skiing.
The Algar Experience offers parasailing, dolphin safaris, and boat rentals for sea fishing (the company's office is located in Albufeira Marina).
Jetboats, jet skis, rocket boats - this and much more is offered by Dream Wave.