Varadero is in Cuba, but really isn't Cuba in the way (say) Havana is.
As of Feb. 2012, If you are staying in Varadero and want to see a typical Cuban town, there is a Hop on Hop off Bus that leaves the far end of Varadero at about 9:30 AM. It arrived at calle 54 about 10:00 +. It is $10 return to Matanzas. We came back on the 3:45 bus. Its well worth the trip which took less than 1 hour. We had a coffee in the Hotel Valesco on the square for a touch of class, at a reasonable price, then explored the town, which has the wonderful Cuban combination of elegant restored building and composting ones.
If you buy something from a small shop or bakery - keep in mind that the $3 loaf of bread is NOT priced in CUC !