Watching the sun set at Mallory Square is Key West tradition and should not be skipped. The sunset is not really the main feature here however, it is the congregation of circus acts, artists and those who don't fit into a category that is the main interest.
There is lots to see; incredible acrobats such as John, who proudly states that he is 54 years old, before amazing you with his acrobatic feats; I won't tell you what it is he does, but you won't be disappointed.
There is Mustafa, a singer/guitar player who says that NPR has named him the most well known busker in the world.
There is everything from fire baton twirlers to tightrope walkers to people who have their dogs walk tightropes to men who sit disguised with bundles of rushes and scare people as they walk past.
Just be prepared to be entertained and be prepared to tip liberally. Oh, and enjoy the sunset too.