Malta is small (about ten by seven miles, with Gozo about a third that) and reasonably well-served by public buses that are cute and inexpensive. They go to most major tourist places and towns, but the frequency varies wildly. However, there are several out-of-the-way ruins and other historical sites that you really can't get to by bus. Our compromise was to rent a car for the first few days, explore the more remote sections of the island, then return the car and rebase in Valletta. Malta is one of the most densely populated countries in the world, and I'd definitely recommend using a car only on the less-populated northern and western sides of the island, and Gozo, which is easily reached by car ferry. Malta has a strict limit on the number of vehicles that can be on the island at any one time, making rental cars a little pricier, but a couple days won't break the bank. See my Crete driving tips for advice on licensing and insurance. Some other considerations:
Kept left - Malta was a British crown colony at the advent of the internal combustion engine. Traffic stays left, and the steering wheel is on the right. Everything else in the cockpit - including the stickshift - is reversed except for the pedals, which are in the same order everywhere. Even if you're used to manual transmission, shifting with the left hand is tricky at first. I had had some practice in Wales and Tasmania, but it didn't take too long to get the hang of it.
Pickup/Dropoff - Do both at the airport. The roads immediately around it aren't as crazy as in the Valletta area, and it will be easy to navigate.
Transmission - As elsewhere in Europe, you will have to reserve way ahead to have any shot at getting an automatic.
Road signs - All signs are in English. The road network sometimes makes goat paths seem straight and simple, so get the best map you can. We ordered one online before leaving, and it was a good thing because we never saw its equal in-country.
Roads - Malta is infamous for the condition of its roads and the recklessness of its drivers. The latter is not as big a problem off-season, when there is less traffic. There were times when the two-way road we were on wound into the hills, got too narrow for cars to pass, then seemed to be on the verge of getting too narrow for even one car to continue. And it's not like you can drive on the shoulder, since the Maltese have used their ample supply of limestone to build stone fences everywhere.
Traffic - As I said above, avoid driving in the Valletta area. Buses there are much more frequent, and you can walk to many places.
Car size - You will regret getting a big car. It will simply not fit in many places.
