Health Concerns -- No inoculations are required for Bali, but it's always a good idea to get shots for hepatitis A, tetanus, polio, and typhoid (likely you've already had some of these). It's also a good idea to check the most recent information at the Centers for Disease Control (click "Travelers' Health" at www.cdc.gov).
The CDC has declared Bali malaria-free, though it is not uncommon on other islands in the Indonesian archipelago. Of concern, though, are the many stray dogs on Bali and therefore rabies, so beware of strays.
You can't drink the water on Bali, but bottled water is cheap and readily available. Just about every hotel will supply you with a couple bottles or a jug of boiled water -- to be extra cautious, use it to brush your teeth as well. Restaurants in tourist areas supply safe water and ice, but to be sure, ask for air minum (bottled drinking water) and no ice. Avoid "Bali belly" (the Indonesian version of Montezuma's Revenge) by sticking to foods that have been peeled or cooked.
Safety Concerns -- To alleviate any terrorism concerns you may have, consider visiting Bali's more remote destinations, asking hotels what security measures are in place, and staying alert when visiting crowded areas. It is recommended that you check with your home country's overseas travel bureau or with the U.S. State Department (click "Travel Warnings" at www.travel.state.gov) to keep abreast of travel advisories and current affairs that could affect your trip.