By Subway
A total of 8 lines covering over 200km have been planned. Line 1 is scheduled to be completed in early 2012, and line 2 shortly thereafter. The opening dates of the lines are "last", which means that they can open earlier in case they pass the security checks quicker. For example, Nanjing's new subway system was opened ahead of time, after safety checks were passed, and the same happened in Shanghai.
By "Water Bus"
Ferry down the Grand Canal takes 30 minutes but only makes 5 trips per day, the first at 7:30AM and the last at 6PM. It starts at Wulin Gate/West Lake Culture Plaza and ends at Gongchen Bridge, with one stop at Xinyifang Grand Canal Culture Plaza. The boats stop first at Xinyifang, then to the newly-developed Canal Culture Square, where you can see the Canal Museum, see if there are any events in the square, and check out the new Xiaohe Steet- a series of "historical" alleys with shops and restaurants similar to Hangzhou's Hefang Street; the area's renovation was completed in 2008. Cost is ¥3.
While really worth taking the trip, Hangzhou now has plans to connect a series of canals and streams throughout the city with the Grand Canal, West Lake, Yuhang River, and Qiantang River, making for increased water transport and a Venetian feel when completed.
There are also passenger boats running along the Grand Canal from near the Qiantang River
Getting to the islands on West Lake, you get to choose between tourist trap Dragon or "Gaily-painted" pleasure boats ¥45 and ¥35. There are also medium-sized power boats ¥25, or for ¥160 you can hire a driver to paddle you around for about an hour. The boats are available in Hubin #X 1, 3, 6 parks and other obviously marked areas all over the lake.