Besides visiitng the Mogao Caves, there's not a lot to do in Dunhuang, at least not at first glance. Give the city a chance, however, and you're likely to find enough to entertain and edify for a stay of several days.
Outdoor Recreation
The sand dunes at Crescent Moon Lake can be a lot of fun. You can rent sleds, ride camels and tumble down the dunes to your heart's content.
Bars & Clubs
The best place to grab a drink in town is at the Shazhou Night Market or Yangguan Dong Lu. There are a few bars inside some of the city's hotels on Mingshan Lu but drinks are much more expensive here.
Performing Arts
A Summer of Dunhuang show runs from June through October, celebrating the long-gone golden age of the Silk Road with song and dance numbers as well as interpretive dance that's intended to evoke the spirit of the Mogao Caves. In the spring there is the occasional mini-festival, which in the past has featured Meihu opera, acrobats and dancing.
Museums & Galleries
The Mogao Caves provide Dunhuang with its impressive collection of history and art. With more than 50,000 Buddhist writings and mural paintings inside the caves, the site is a major repository of western China's history (predominately the 3rd century). Despite looting, the caves still contain an astonishing number of images depicting various scenes from Buddhist lore. Who needs a museum with caves like these?
Festivals & Events
Other than the Summer of Dunhuang festival, Dunhuang's celebrations seem to be limited to the Shazhou Night Market. Open all night long to take advantage of cooler temperatures, the market is a lively place.