I would say Exit Festival is one of Europe's best music festivals, the combination of the setting, sun, people, music and the serbian atmosphere completely blew me away. One of the most amazing events I have ever been to! because Serbia isn't in the EU prices for beer, cigarette's, food etc.. are very cheap! A lot cheaper compared to anywhere else in Europe.
You dance all night till the sun comes up then everyone heads to the beach/campsite for whatever sleep they can get. The heat is impossible to sleep in a tent in, some wise people brought hammocks, I just bought a lilo at the local supermarket and that provided me with a cool bed for the whole festival!

There are also tree's on the beach where most people pass out under during the day. The campsite for 2011 was alot better, it was moved to a small forest which provided shade to sleep in during the day! and this new campsite is right beside the beach!
As for the serbian police and drugs... If you are going to do/take/buy anything, do it when the sun goes down and in the crowds. A lot of locals sell within and outside the festival (in the city we got handed a leaflet for 'transport links to belgrade airport' with a phone number on it, the guy leaned in a whispered "this is not for transport, this is for drugs")
The festival is littered with undercover police, just trying to arrest and fine tourists for their own pocket. The police in Serbia are very corrupt, so don't expect them to treat you like police from home. The undercover police wear small black satchels over their shoulders and are constantly on the look out for drugs. You'll spot them about the festival, looking like normal festival go-ers with a black satchel.
My friend sparked up during the day in the campsite and within 10 minutes undercover police arrived. We didn't see him for 24 hours and he came back with a few stories to tell.. Ended up being fined £350, and he said that the fines very much depended on how much the police liked you and felt like fining you.
It's a huge festival with such a diverse range of people and music! You can really get what you want from this festival whether it being raving all night in the dance arena or taking it easy and enjoying the atmosphere, skankin' at the reggae stage till the sun comes up

The city offers a lot during the day, you can browse the markets, go to the local beach or sit in one of the cafe's and have lunch! The food in Serbia is amazing!
I can't recommend this festival enough, my friends convinced me to go last year and I am forever grateful! See you at Exit 2012.