I've not been on holiday in south of France (or France even, for that matter, except Paris) in August, partly because many of the locals are on holiday themselves, and partly it's the high season for travel so prices can go up considerably during this period. So I can only give my personal opinions, and perhaps someone else can provide more information.
I like areas of Provence just outside of Marseille, and they're usually small towns, some up on hills/mountains (so absolutely gorgeous views) and a car is definitely something you should rent to get around. Market days vary from town to town, and there will be plenty to see and to visit. Shops and restaurants that will be open, that's hard to say exactly. Certainly if the owners are on holiday, it'll limit the choices that you get.
I'd imagine the French riviera would be pretty packed, with sun/sea seekers, at that time of year. Since I don't fancy wrestling for a spot at the beach with a gazillion other holidaymakers, I will not go near the most popular towns such as Nice.