If you go to Nainital looking for some tradition pahadi fare, you will be in for a disappointment. The tourism boom has led to an explosion of restaurants serving Mughlai and Punjabi-Chinese. So while you are never at a loss for things to eat - from momos to chaat to butter chicken to fish and chips to Manchurian; your request for something authentic will meet with blank stares.
The Mall is lined with restaurant serving a variety of cuisine with an accent on the contemporary (read: Pizzas, Punjabi-Chinese, even Lebanese, although we seriously doubt the authenticity. Stay clear!). Machan, with its innovative wood-and-stone decor; you sit on logs of wood ; and good location on the open first floor, is great for people watching and decent meals.
Tallital has rows of dhabas that serve good Mughlai, although you might want to frequent these only if you are a student on a budget trip; families might not like the ambience. We like the Sher-E-Punjab, popular with the locals.
Check out the Tibetan Market at the Flats with rows of kiosks serving fast food, everything from dosas to chaat to momos. Pick up an ice cream here and eat candy floss! Great for kids.