Qingdao does not have a large population of Germans. It is almost entirely Chinese. The reason it appears German is because the city was invaded by the Germans, who forced the Qing to allow them an area of influence in Shandong province, centered on Qingdao. An interesting fact about Qingdao is that it was taken by Japan during WWI, after Japan declared war on Germany.
Qingdao is not an old city; It was built around 1891. The Qing designated the area as a primary defense against naval attacks. After WWII, the Kuomintang allowed the Americans to use the city as it's Western Pacific Fleet headquarters. The Communists took the city in 1949. Because Qingdao was Western-controlled throughout almost it's entire history, it already had sufficient infrastructure and lacked the decaying Hutong of older cities. Thus, the Communists left it pretty much alone, which is why Qingdao is free of the so-called "Commieblocks" that are seen in most Chinese cities.
Today, the city is known for the famous "Tsingtao Beer," probably the most famous Chinese beer. The city is also, of course, known for it's tree-lined streets, European architecture, and beautiful (and crowded) beaches.
Fushan Bay, which is near the CBD of Qingdao, will host sailing events during the 2008 Beijing Olympics.