Rick's words on this subject agree with what everyone above has said, and summarize the issue very well.
"While 80 percent of Venice, is, in fact, not touristy, 80 percent of the tourists never notice."
"A 10-minute walk from the madness puts you in an idyllic Venice that few tourists see."
The crowds are at the train station, the Rialto, Piazza San Marco, and the most direct foot paths connecting them. If you stray off this path, you can lose the crowds quickly. During the day, the vaporetti are indeed crowded, but again, if you take them off peak hours, or you take the ones that go around the island instead of through the Grand Canal, you'll have fewer people riding with you.