Renting is cheap (28 Euros for one day). Plentiful of rental agencies in the airport. Driving around is fairly simple, well post signed. Traffic is dense in the capital but ok. Just beware to folk driving fast and overtaking without light!
Unless you're arriving from Saudi Arabia (or are in the Arabian Gulf region and really want to drive) you get to Bahrain via a plane. On the weekends you'll notice the influx of Saudi-licensed cars around the shopping malls and nightclubs, but basically, if you're not coming from Saudi you'll arrive in Bahrain by plane.
You need a car in Bahrain. A friend of mine came to visit me there a few months ago and pointed out something I'd gotten so used to that I'd never really noticed. Namely, very few people WALK in Bahrain. You'll see a lot of Asian workers who will walk around but the majority of residents will travel by car/cab. The weather's too hot and humid generally to really enjoy long walks except at night.