I feel I should make it clear that there is more to Poulsbo than just the historic downtown district. It's just that the historic district is the charming, fun part of town, in my opinion. There's a whole other side to the town, too, consisting of strip malls along the highway that goes through town. This area is not unique or very endearing. It's full of chain stores and fast food restaurants and such. Nothing that you can't find most other places, as far as I could tell, except possibly the leading seller of RV's in the entire country (Poulsbo is actually known for this).
I stick to the historic downtown.
Poulsbo was originally settled by Norweigan immigrants in the late 1800's, and this heritage is what's celebrated in the architecture and culture of the downtown area. Like many immigrants, the Norweigans chose a place to settle where the landscape reminded them of their homeland - in this case, snowcapped mountains and the fjord-like Liberty Bay.
Norweigan was the main language spoken here until WWII, when a lot of other people moved here to work at the nearby Bangor Naval Base. Every May the town still puts on a VikingFest in honor of Norway's Constitution Day. Besides a parade and other festivities, during VikingFest the church has a lutefisk dinner and mass is said in Norweigan.
Favorite thing: Kayak in Liberty Bay. The weather was awesome for late September. The sun was shining bright, and Mt. Rainier was clearly visable. The water is very calm, so even if you've never kayaked before, you won't have a problem. We rented from Olympic Outdoor Center. Their website is: http://www.kayakproshop.com/