All of the major hostels on Ilha Grande are in and around the 'town center' of Vila do Abraão, which is where the boat from the mainland comes in. The two biggest hostels on the island are in fact feet from the jetty, and it's this prime position as the first hostels you see which has enabled them to become the biggest both in terms of size and liveliness, but this also enables them to charge more than any other hostel on the island.
Venture a few dozen meters down the beach and into the dusty tracks that make up the town's main roads and you'll encounter a plethora of cheaper hostels and campsites. Also along these roads you'll find an array of restaurants at both ends of the price scale and plenty of places to buy amazing glasses of acai starting at 3-4 reals.
The beach in front of Vila do Abraão is fine to have a meal or play a bit of football or volleyball on, but for the really stunning beaches that Ilha Grande is famous for you have to venture a little further afield. Carrying on westward along the coast and you'll encounter several isolated pockets of pristine beach, but for the real gem that is Mendes Lopez beach you'll either need to take a boat or walk for around two hours up through the hilly jungle. It's not an easy walk, but a beautiful one. To make the most of Mendes Lopez however, you should get there as early as possible as the jungle shields the sun by mid-afternoon and it can get quite busy in peak season. There are plenty of other great beaches around the island, as well as several lagoons and snorkel spots. All are reachable by boat which can be organized by your Ilha Grande hostel.
...And don't forget to look out for dolphins on the boat to and from the mainland as pods are often spotted in these waters.