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Cambridge city centre only covers a very small area, so it's easy enough to see everything on foot. The train station isn't very central, so you might want to take a bus to the city centre (Citi 1 towards Arbury, Citi 3 towards Fison Road or Citi 7 towards Cottenham), but even that is definitely within walking distance. Get a good map, or walking directions from walkit.com, and remember not to assume that you can walk through all the college grounds for free. Public footpaths are often marked as going through King's and Trinity, for example, but unless you're a University member or a Cambridge resident you have to (or, you're supposed to) pay, at least during Summer (I'm never quite sure of the restrictions!). Also when you're walking around Cambridge, keep an eye out for the bikes. You often get cyclists - legally or otherwise - on what look like pedestrianised zones, so don't just assume that you can walk safely down the middle of a road just because there are bollards at the end of it! There are couple of particularly bad bits as far as mad cyclists go - Garret Hostel Lane, which leads between Trinity and Trinity Hall to the river and the backs, and Senate House Passage, which leads down the side of Gonville & Caius just by Great St Mary's church.
Cambridge is a great place to cycle, with very few hills. If you are here for a few days, or are staying a little way from from the city centre it may be worth hiring a bicycle. Try Station Cycles near the railway station for a start. There are plenty of on and off road cycle lanes but don't cycle on the footpath or you will get a fine. Also make sure you use lights at night. Don't forget to lock your bike!
The main bus company is Stagecoach . For travel through the centre of the city and surrounds, including the station, use the Citi routes. If you wish to travel to Cambridge by car but not drive in the town centre, try the Park & Ride service. Individual fares vary, but the current fare (May 2010) for an all day pass or "DayRider" is £4.20 and is often the best value for a return journey.