Luz is located in the southwest corner of the municipality of Lagos, and covers an area of 21.78km2. It is bordered to the the south by the Atlantic Ocean, to the north by Barão de Saõ João, and to the east by Santa Maria and São Sebastião, and it is adjacent to Budens, in the municipality of Vila do Bispo. It is surrounded by two mountainous areas, Montinhos da Luz (99 metres) and Montinhos do Burgau (68 metres). The beach in Praia da Luz is an intermediate-size Blue Flag beach with two distinct zones: the white sandy beach and rocky cliff area, characteristic of the Algarve. Whilst the waters are typically clean and transparent, its temperatures are variable, owing to the influence of the Atlantic currents. Demographically, the older parish of Luz was a small centre. By the 18th century, following the 1755 Lisbon earthquake, the region was decimated, and many of its residents abandoned the region. The development of the region only began in the second half of the 19th century.
Luz is dominated by its beach, and part of the Algarvian Gold Coast (Costa d'Oiro). This has attracted many visitors to the region, resulting in a shift from an economy based on fishing to one providing services for tourists. Along the beach, many of the canning factories were closed and replaced by windsurfing and diving schools, as well as, restaurants and shops tailored to the needs of a seasonal visitor.
Luz is pretty, unassuming and has a wonderful beach. The village has a homely and welcoming ambience, where visitors and long-term residents can spend the warm summer days in the beachside cafes and restaurants chatting and socialising.