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As you approach Lagos from the East (from direction N125 Faro) you will come to a roundabout. Follow signs to town center/bus station and you will be on the "Avenida" opposite the harbour but before the market opposite the "Galp" petrol station you will see some parking, including a large area you can park for free and with no hassles.
There is a toilet nearby at the bus station and you are about 5 mins from town. This could be an area for petty theft although the risk is lower than in an equivalent English town so take the usual precautions.
Enjoy Lagos is IMHO the best town on the Algarve.
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