Here it means "quite a lot". There are quite a lot of cafés. J'ai pas mal de travail à faire. I have quite a lot of work to do. Elle a pas mal d'amis. She has quite a lot of friends. It can also be used with verbs sometimes, without the "de". Je l'ai pas mal aidée. I helped her quite a lot. But this doesn't always work, the usage with verbs is very limited. I can't find another sentence, maybe it's the only one... :p

You are right. It has a different meaning here. "Il y a pas mal de cafés." means 'There are quite a lot of cafes'. Another example would be 'J'ai pas mal de travail', meaning 'I've got quite a lot of work' or, perhaps, more idiomatically 'I've got a fair bit of work'. 'Pas mal de choses' means 'quite a lot of things', and so on.