The path here has an open area to the left as you travel along with a Divine Blessing item in it. There is also a corridor you can travel along to meet an odd man obsessed with statues as well as a Life Gem and a Homeward Bone. Beyond him is a room with three doors, two of which contain poison enemies that can damage you quite a bit, so leave the doors closed and head back to the main path.
As you travel along the cliff path, look for a small open ledge on the edge of the cliff with a ledge below it that you can drop down to. You can then drop down from this to find a Morningstar and Cleric Sacred Chime on a body as well as a pair of Binoculars on another corpse (an important note for ranged characters: Binoculars allow you to manually target your spells, increasing their effective range significantly. Something I would have loved to know when I started the game). Travel along the path to rejoin the road at the archway entrance to the settlement.
Pass through (or by if you used the cliff ledge trail) the ruined archway and enter the small village. On the East side of town (towards the cliffs over the water) is a bonfire to light. A woman in with a dark green cloak (the Green Herald) will be standing nearby and after a short chat, she gives you one of the most important items in the game. The Estus Flask.
Note: For those who played the first Dark Souls, the Estus Flask no longer comes with 5 (or when upgraded 10) charges. You have one charge. Plain and simple. You may need to rethink your more aggressive combat style if chugging these constantly is what you normally do.
If you want to join a covenant, talk to Sauldon sitting at the base of the large statue on the upper cliff. Keep talking to him until he tells you about the Way of Blue covenant and invites you to join it. The effect of having the covenant's ring on is that blue allied players will appear to defend you if your world gets invaded by enemy players.
Quite a handy feature now that invasion works the other way around (you can only get invaded by enemy players when hollowed instead of unhollowed). There is no penalty for joining and it is easy to leave the covenant if you desire by talking to Sweet Shalquoir (a talking cat) in a nearby hut. You can also be rewarded by the covenant by helping defeat enemy players that invade your world (although you may want to save that for New Game +).
Feel free to have a wander around the village, talking to both merchants and the rather obstinant blacksmith who has been locked out of his new shop. There is an Estus Flask Shard (upgrades your flask capacity) that can be found by knocking down (attacking) the rock on the edge of the well in front of one of the buildings around the giant pit. This will raise up a body with the shard on it for you to grab. Take it back to the Green Herald and use it to upgrade your flask to two uses.
On the right side of the blacksmith's building is a Soul of a Nameless Soldier and a Life Gem to pick up. On the right side of Sweet Shalquoir's shop (the talking cat) is a Life Gem hidden inside a tent. Inside Mughlin's shop up a ladder is a chest with a titanite shard inside to grab.
The house with the locked door (mansion) can be opened only after obtaining a key in the forest of giants from NPC Cale. Inside, you can find a Pharro's Lockstone in the first room. A chest in the upper area holds a Titanite Shard and Torch. The basement holds a lone skeleton (an additional skeleton is added for each additional playthrough). A corpse here holds an Estus Flask Shard. A nearby chest holds a Soul Vessel as well.
With your new healing item (that can be replenished by visiting a bonfire) people who have played the previous Dark Souls game should be feeling right at home (minus four Estus Flash charges though). For those that haven't, well it's time to get started.
First off we'll grab some helpful items from nearby before heading for the first main area. Head up the cliffs out of the village (opposite the way you came in) and at the top you should find a homeward bone on a body and an memorial (don't use it unless you are in New Game +). Head back towards town and turn into the church you passed on the way. Follow the only path down until you reach the bottom of a spiral staircase. Near the base of the staircase should be a shield inside a chest in a little alcove.
That's all we can grab for the moment to head back to town to the bonfire and then into the underground tunnel nearby (beside the wall and entrance arch into town). Just inside you should spot a chest to your right over a small wall. Walk around the wall and grab the Rusted Coin from it. As you keep walking along you will run into a barred doorway. Backtrack a few steps and you should find a narrow gap between rooms and a second barred door. This one has a lever next to it that you can pull to open it up (keep in mind it will close automatically after a few seconds of being fully open so move through as soon as you can).
Keep following the tunnel until you reach a small cavern, a ledge will extend to your left (probably with a lot of bloodstains from people being stupid), don't jump off it as so many people like to do. Instead, cross the wooden bridge and totter down the narrow planks on the other side to reach a chest with a Human Effigy inside. Head back up the planks and through the nearby tunnel to reach the Forest of Fallen Giants, the first real combat area (that can be dealt with at this point anyway).