Dry Season is High Season
Dry season is between the months of April and September. Bali receives the most visitors during July and August. Temperatures are pretty steady all your round though. During Bali's dry season beaches are generally clean and Bali shows its pretty side. One can still expect occasional rainfall though and sometimes even the locals are surprised how dry a week during rainy season can be and the other way around. Have a llok at the chart below and check out temperature, no. of days with rain etc in Denpasar, which is located in the south.
During rainy season which is typically from October to March Bali becomes more quiet. The sea is rougher, the beaches in the south can be quite dirty due to debris washed onto the shore. Winds are stronger at the coastlines, the water currents pick up and it can rain in buckets. Although usually the rain stops after a few hours and the sun shines again. A lot of the times it rains during the night and days are o.k. Very rarely you have a few days when it rains continuously.
Central Bali and the Mountains
Bali's central mountain area is typically cooler and also more rainy than the lower coastal areas. Especially at night temperatures can drop significantly in the highlands near the volcanoes. Gunung Agung is for example 3031m high! Also the region around Ubud is a slightly cooler and has a bit more rain than the south of Bali (Kuta, Legian, Seminyak, Denpasar, Sanur, Bukit Pennsula, Pecatu), which makes it rather pleasant.
Bali's is located very near to the equator, therefore its warm, tropical climate makes it a huge draw for tourists. Average year-round temperature stands at around 26-27°C with a humidity level of about 85%. Water temperatures are always pleasant. The two seasons are not clear cut and fully predictable. Christmas and New Year is clearly high or peak season on Bali and tourists come from all over the world to enjoy the beaches, the surfing, diving, the restaurants, the club, the spas and everything else Bali has to offer - although it is technically "rainy season". One can do everything during wet season but maybe climb he volcanoes and trekking in the highlands.