U.S.Citizens are entitled to drive in Portugal with their U.S. issued driver's license for a period no to exceed 185 days, provided they are not legal residents.
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If you have a valid license from your home state, you can drive in European countries for up to 90 days without further documentation. However, once you have spent more than 90 days in Europe and wish to continue driving there, it is recommended that you get an International Driver's License (IDL).
Driving in Portugal is generally easy. There are a lot of recent roads and they are mostly well maintained. Some villages on hills will have very narrow roads, so park outside and explore on foot. The most tension I felt was in the Algarve, because this is the place with the most tourists.
International Driving Permit (if you have one) Passport. Car documents (like the registration, proof of ownership, and vehicle inspection report) Proof of insurance (in Portugal this is represented by a sticker on the lower right corner of the windshield as well as a certificate of insurance)
Portuguese traffic lights follow the conventions of the Vienna agreement and so should be familiar to most drivers. You cannot turn right on a red light unless indicated and you should also be aware that many local drivers run red lights.
Portugal is not a large country and you can get almost everywhere easily and efficiently by train or bus. Regional trains are often cheaper and some lines very scenic, but it's almost always quicker to go by bus – especially on shorter or less obvious routes.