We just spent 8 days here (November 2012). 
The hotel is very beautiful, very clean, relaxing, faultless service and exactly the standard I'd expect for the rates etc. Cold towels and drinks as soon as you walked through the door and very friendly relaxed environment.
The hotel restaurant food is very good, though fairly expensive - and there are lots of local restaurants close by on the beach where you can eat slightly more basic and cheaply.
Mangi's bar next door for example, and has a good bar, good food amd with good music and a pool table.
Langi Langi restaurant if you walk down the beach (turn right along the beach with the sea in front of you and it's a 2 minute walk) was really good food and they have a special hot curry menu.
Watching the sunset over the infinity pool and the sea is spectacular, very beautiful and the pool bar does happy hour cocktails every day from 5 til 7 so it's a lovely place to relax at that time of day.

The beach is beautiful, really clear sea and clear white sand with a much less rocky and weedy sea bed than those further up that we visited. It's really shallow and calm to swim in.
The only bad thing about the beach is getting hassled quite a bit for booking trips and people selling the usual kinds of stuff. In hindsight, I would have booked with the hotel tour operator for a quieter life and the quality probably would have been a higher standard, but it is a lot cheaper to book with 1 of the guys on the beach. We haggled quite a bit and got a good price on a trip to the south of Zanzibar to swim with dolphins, which was great, but too many boats around when we were there to get the best experience I think. Try just saying youve already booked everything already until you work out what you think you want (but whatever you've booked, they'll suggest something else..) our experience was that they're fairly friendly but get very greedy - when you've booked 1 thing, they will constantly try and up it to something else. You try and be fair as this is how they make a living I know. We booked 1 trip with a guy called Sebastian, and then another trip with a different guy called Julian.
When Sebastian saw that I was booking another trip with someone else, he was fairly unpleasant. He said he hoped a big shark would eat me on the snorkeling trip and I really hadn't been rude to him at all. I just walked away saying he was doing my head in when he was having a go at me for not booking with him. Unfortunately the hotel can't really do much about the hassle on the beach. I guess they must have their reasons for not advising you about it, and if they approach you first to offer you trips, I guess you'd feel like they were trying to pressure you as well, so they can't win :-) but it's just something to be aware of and its going to be hard to avoid unless you can afford to go and stay on a private island or hotel with a private beach.
Just a tip if you get sick....My boyfriend arrived sick with tonsillitis that he had just come down with on the plane. The reception staff I asked, first advised I go to the village to the supermarket or to ask a farmer. The pharmacy - which is what she meant - was a hospital which none of the locals I asked could help me find very easily as they weren't familiar with the word pharmacy and it was hidden away. It had the words dispensary on the outside of the building so it would have been useful if they had said this to me. It was pretty run down with no staff around but after waiting for about half an hour a doctor appeared and I bought penicillin from him for about £15.
The trips we did - swimming with dolphins, the monkey forest, the spice farm, and a snorkeling day trip.
Also if you want to see a truly stunning hotel, go to Zalu for lunch. You can walk along the beach if the tide isn't high, but it takes about 40 minutes, or get a taxi or walk through the village to the other side of the island. It  a  breathtaking lunch restaurant on a pier on the sea and lunch was fairly reasonably priced for such a stunning place. 4 of us paid about $45 each for 3 courses with wine.

We were planning on staying at Kendwa Rocks and last minute decided to change and try the Z Hotel. We were not disappointed. Friendly staff, great rooms and a great restaurant. You can book diving/snorkeling trip, local trips, and anything you want through the hotel.

They have a spa, a great bar and and every night they have a happy hour. Rooms are impeccably clean and the staff are very friendly and attentive to your every need.

My only complaint would be that the service at their upstairs restaurant is painfully slow. We ate there on multiple occasions (because it was delicious) but it would always take almost an hour for anything to come out. Whether it was a salad, pizza, appetizer. Not a major issue but something they could probably work on.

Other than that it is a great, relaxing slice of paradise and highly recommended. Especially post safari or Kilimanjaro.

This boutique hotel is the perfect place to switch off from the rest of the world. Small but well appointed rooms are offered, but you won't need to spend much time in them. To relax The hotel offers an infinity pool with a stunning view of the clear ocean waters, pool side massage and cocktails.

Additionally the hotel manager Judy assisted us with a sticky situation which we were very grateful for.

Didn't know much about Zanzbiar if I am honest before I looked into a holiday there.... what a place! I imagined it to be a place for honeymooners only... and don't get me wrong it would be an amazing place for a honeymoon but there is so much more to do! Amazing food, game fishing, diving, kite surfing and a scattering of chilled beach bars too.

The Z-Hotel is without a doubt the nicest hotel on the Island. If you are looking for the personal touch that comes from a private 'boutique' hotel with the luxury and amenities of 5 star then this is the place. The staff are so friendly, you really do feel at home when you arrive. The rooms are immaculate and remain that way with the amazing housekeeping daily, all the rooms looking out to the turquoise blue ocean. Cocktails by the infinity pool as you watch the sun set... then dinner either at the hotel or at one of the amazing restaurants literally next door.

Seriously, I have been to all the normal beach spots: Thailand, Cambodia, Bali, Goa, Sri Lanka etc... and this place is up there! Get yourself to Zanzibar, and most definitely the Z-Hotel... I will be back very soon!