Rains tend to fall in the afternoon, pretty much every day, from January to April and during October and November. This won't usually impact on low level outdoor activities although some volcano trails and access roads may become impassable and closed for safety reasons.
The best conditions for water visibility in Bali are during October and November, when the weather is generally calm, and during the start of the south east monsoon, which extends from May to July.
Either side of the rainy and summer seasons, in May, June and September, you'll find the best time to visit Bali for drier, less humid, conditions matched by some good deals on accommodation and fewer crowds.
August is probably not the best month to go to Bali as although dry and sunny days are at a premium so are accommodation prices; so, if you can, wait another month and visit in September.
Bali during December and January can get crowded with holidaying Antipodeans as Aussie and NZ schools take a break from November through to February.
Finally, if you're thinking of heading over to Bali's neighbouring island of Lombok, to see Mt Rinjani, then be aware that the national park usually closes from January to March.