Restaurants are owned by the government and run by employees, and the food ranges from bland to spicy. Generally the spicy dishes are not as spicy as the fiery pepperpot spiciness found on some of the other Caribbean islands. The national dish in Cuba is rice and beans (moros y cristianos), and the best food will generally be found in your casa particular or in paladares (locally owned restaurants in private homes).
Black beans are a main staple in Cuban households. Cubans eat mainly pork and chicken for meat. Beef and lobster are controlled by the state, and therefore illegal to sell outside of state owned hotels and restaurants, however special lobster lunch/supper offers are plentiful for tourists. You may see turtle on menus in Paladares, but be aware that they are endangered and eating them is illegal.
Paladares are plentiful, even in the smaller towns. Seating is often limited, so you may need to arrive when they open, usually around 5 or 6PM. If you are staying in a casa particular ask your host for recommendations, as the quality of the food can vary substantially between paladares. Only eat in ones that have a printed menu with prices, otherwise you are very likely to pay two to three times as much as you should. That said, several have taken to printing two different menus, one with local prices and one with foreigner prices. Eating in paladares is perfectly legal, but be aware that if you are taken there by a Cuban, you may be charged extra in order to cover commission of the person who brought you. A supper will cost around 7 to 10 CUC per person.
Eating in state owned hotels and restaurants is significantly more expensive and compares with prices in many first world countries. An average supper with soup, dessert and a glass or two of wine could easily set you back 20 to 30 CUC per person. Note that in these establishments, the vast majority of the employees' income comes from tips (their monthly salary often being less than the cost of one meal), making it a friendly and welcome gesture to tip liberally for good service.
In bigger towns you will also find some state-run restaurants which cater mainly to Cubans and accept local currency. Prices are extremely low (e.g. 10-15 CUP for a sandwich and cooked meals for of 30-60 CUP), but the quality of food, service and ambiance is typically relatively low. You may be able to secure better food by offering to pay in CUCs. Still, this may be an option if you are on a low budget or seeking an 'authentic' Cuban experience. If you choose to tip, do so in CUCs as anything else would be an insult to staff.
Most casas particulares serve their guests a large breakfast for around 2-5 CUC per person if requested (you can tell them what you want for breakfast). However, make sure you get value for money - often you can buy for much less money (in national pesos) the same fruit, coffee bread/omelette etc. out in the street that your casa particular owner will want to charge you 4 times more for just to present it to you in a more comfortable fashion. However, for money-savers, 'building' your own breakfast for national pesos is quite easy. Every little village has sandwich shops where you can get a sandwich of ham, cheese or with omelette for 5-15 pesos depending on the size. Most of them also sell Cuban coffee (sweet!) for 1-2 pesos or a juice for 2 pesos called 'refresco'.
Some casas particulares may also serve guests large dinners for 7-10 CUC per person.
Sometimes if you ask nicely, your casa particular owner may let you use their kitchen to prepare your own food - in fact, they are usually quite accommodating if for instance you have special dietary requirements, or young children etc.
You can also find small street vendors selling a variety of foods, typically sandwiches, fruits (1 banana 1-2 pesos), pizzas (10-20 pesos), spaghetti in tomato sauce, ice cream and sweet delights like cream cake. The quality varies from vendor to vendor. Many of these stores are run from people's living rooms, and buying from them is a good way to help provide some extra income to a Cuban family. While these meals are satisfying and cheap, be warned that long lines are common and the vendors are rarely in any rush to see everyone fed quickly.
There are private restaurants that cater for Cubans and are only allowed to take national pesos. You will realize them by a board that states the daily offers and prices. A tasty serving of rice, vegetables, plantains, and pork or beef will cost around 30-50 national pesos. Some places even sell it to you in a cajita ["little box" in English].
Bottled water is sold in CUC throughout the county where one litre will cost you around CUC 0.80 - 1.20. You can by a 5 litre bottle for CUC 1.90 and transfer it to smaller ones.
Check out the small Havana Chinatown a few blocks west of the Capitolio if you are looking for Chinese themed restaurants. The food is neither spectacular nor authentic Chinese, but decent enough if you can't face another serving of rice and beans. Street food can also be a notch better here, try the area around the intersection of Avenida de Italia and Avenue Zanja.
Cuban national cocktails include the Cuba Libre (rum and cola) and the Mojito (rum, lime, sugar, mint leaves, club soda and ice).
If you request a rum in a small country restaurant do not be surprised if it is only available by the bottle. Havana Club is the national brand and the most popular. Expect to pay $4 for three year old white rum or $8 for seven year old dark rum.
Cristal is a light beer and is available in "dollar" stores where Cubans with CUCs and visitors may shop. Cubans prefer the Bucanero Fuerte, which at 5.5% alcohol is a strong (hence the "fuerte") darker beer. Both Cristal and Bucanero are brewed by a joint venture with Labatts of Canada, whose beer is the only Cuban beer sold in CUC. A stronger version, Bucanero Max is also available - primarily available in Havana.
There are also smaller brews, not available everywhere, such as Hatuey and Corona del Mar. These are sold in CUP.
Note that - similar to restaurants - there are two types of establishments you can go to drink in Cuba: Western-style CUC bars with near-Western prices, a good selection of quality drinks (and sometimes food), nice decorations, semi-motivated staff and often live music, typically found around tourist hot-spots such as Old Havana and tourist hotels. Here you will mostly meet other tourists, expats and a few Cubans with access to hard currency, but don't expect a 'local' experience.
The alternative is to seek out local neighborhood bars where you can choose from a quality, but limited, selection of drinks (mainly locally produced rum by the bottle, beer and soft drinks, very rarely will you be able to get cocktails such as mojitos), cigars of dubious and cigarettes of only slightly better quality, and sometimes snacks. Local bars accept CUPs and are dirt-cheap, although bar keepers will often ask you for CUCs instead - it's up to you to negotiate an acceptable price, but keep in mind that local bar staff are state employees and (literally) paid a pittance. These bars are also a good way to meet locals who may even open up a bit and talk about their lives after a couple of drinks.
Local bars are not that hard to find despite typically having no prominent signs displayed outside. Just ask or walk around a local neighborhood and look out for a bare-walled, neon-lit room without any decorations or furniture, save for a bar and a few rickety chairs and tables, sullen staff and depressed/bored/drunk-looking customers, almost always men. Contrary to Cuba's reputation as a music and fun loving nation, local bars are not boisterous affairs - they are quiet, almost subdued, music is rarely played (if at all, it will come from a radio but never be live), and have the charm of third-world railway station waiting rooms.
Nonetheless, they make for a fascinating experience (especially if you make the effort to speak to some locals - offering to buy a drink will get a conversation going, no surprise there), and they provide a good insight into what life must be like for ordinary Cubans without access to hard currency. As a foreign visitor, you will be generally welcomed. Discussing politics over a drink is a tricky, and typically lose-lose proposition: speak negatively about the Cuban political system and you may put your Cuban drinking companions into a very difficult position as they may very well be informed on for hanging out with subversive foreigners.