Dress Etiquette 

First thing you need to know is that Israel is a highly Westernized country, while at the same time parts of it remain religous and traditional. 

Most parts of Israel (Tel-Aviv, Haifa, Eilat etc.) are completely Westernized. No need to worry about a special dress code. In fact, dress is so casual you never have to worry about dressing up, especially in summer. If you travel on business, a suit is usually discouraged - nice slacks and shirt are usually enough for most business occasions. 

In some neighborhoods of Jerusalem one should dress appropriately to local sensitivities (long trousers for men, loose shirts covering the elbows and skirts covering the knees for women). Driving , for instance, on Saturday in a "Haredi" neighborhood (Haredi= ultra orthodox Jew), may bring stares of disapproval from the local residents. Or simply walking into Meah Shearim, an ultra-orthdox neighborhood in Jerusalem, dressed in typical western fashion (bare arms, shorts or trousers for women) will bring rise to protest. Signs instructing visitors how to dress with sufficient modesty are posted at the entrance to this neighborhood. Large groups of men and women touring may draw unwanted attention . TIP: before Meah Shearim, break up into small groups (2-3) and leave a minute or two between you.
During Saturday and Jewish holidays, The "Haredi" streets in Jerusalem are usually blocked by gates, so it would be difficult to accidentally wander in. None the less, it would be advisable to visit Jerusalem mid-week if you are driving.

Don't forget to use sun-block. The sun in Israel, even during the winter, is very strong.

 

Tipping

The going rate for tipping in Israeli restaurants and cafes is between 10-15% depending on how pleased (or not) you are with your waiter/waitress. 10% is usually the minimum, with 12% an average tip. Only where warranted of course, a generous tip is always appreciated.   Taxi drivers do not expect to be tipped (or at least - they are not surprised by non-tippers. Locals do not tip in taxis).   

Please note that restaurant wait-staff prefer tips in cash, and some might ask you not to add a tip to a credit card bill. The choice is yours - at your convenience. For this reason, it is recommended that you have some small change on you, even if you plan on charging your meal(s).

Road and Driving Etiquette

Israel has a modern network of roads and highways and all major road signs are tri-lingual (Hebrew, Arabic and English) so it is very easy to navigate. Similarly to other Mediterranean countries, drivers are relatively aggressive, so don't take offense, but drive carefully and defensively.  Important note to North American drivers: It is illegal to turn right on a red light.