By the nature of things, the following is generally personal preference, with some input from cabin guests. Pubs and restaurants change in quality, so these recommendations may well get out of date, but they were originally written in July 2010.

First of all, I hear consistently good reports from cabin guests about Ludlow's 2 Michelin-starred restaurants, Mr Underhills (www.mr-underhills.co.uk), and La Becasse (www.labecasse.co.uk), although we haven't ourselves been to either yet - maybe it's time to take the plunge and stretch the budget. By all accounts the lunchtime menu at La Becasse is good value. Both restaurants get well booked in advance, so if you're planning to come and stay, and you like the idea of a treat, you need to think ahead.
We go out for a meal about once a fortnight, and the current favourite is the Jolly Frog (www.jollyfrogpub.co.uk), about 8 miles away, just outside Leintwardine. We've been back a dozen times or so, and have always really enjoyed it - main course is about £15 - 20, there's a wood oven, and the menu changes most days, but normally includes a great choice of fresh fish. Quite often busy, french bistro atmosphere.
The Unicorn pub in Lower Corve Street, Ludlow (www.unicorn-ludlow.co.uk) does simple, good food with fresh ingredients - £10 for a main course.
As for drinking, the South Shropshire area has some fantastic small breweries with some of my all-time favourite real ales. These are:
Wood's Shropshire Lad, brewed about 10 miles away at Wistanstow. Wood's brew a good few other beers, but if Shropshire Lad is in one of the handpumps, that's first choice. A darkish, unusual bitter.
Three Tuns XXX. This brew can be difficult to find in Ludlow - some of the pubs sell Cleric's Cure from the same brewery, which is also excellent, but strong enough to shorten your evening (5% or so). XXX is a light golden colour, very hoppy, and delicious. The Three Tuns, next to the brewery in Bishop's Castle, is also a great pub, and not bad for a meal.
Hobson's Twisted Spire (3.8%). The brewery is about 15 miles away in Cleobury Mortimer, and if you want a pint fresh from the brewery, try the King's Arms. Hobson's Bitter is also excellent.
There's a similarly wonderful choice of locally brewed ciders - I'd particularly recommend Dunkerton's and Dragon Orchard ciders.

If I had to single out a favourite pub, it would have to be the Sun at Leintwardine (www.suninn-leintwardine.co.uk). I don't often get there, as it's a challenge for us - it's about 9 miles away, so expensive for a taxi, and things have changed recently, so opening hours have been unpredictable (usually opens around 8ish), but if you can manage to get over these two hurdles, it's wonderful. I'd better add a bit of description, as it won't be to everyone's taste. It's a 'parlour' pub, simply furnished, with Hobson's out of the cask. It sounds daunting to walk through a door straight into 2 front rooms, but there's a genuine welcome for strangers (of which I'm one), and it's always an experience.