"... plastic stones out to the curb and line it with lights ..." There wouldn't be any way anyone could comment on this idea without seeing the entire path of which you speak. The close-up picture cannot explain the context.

"Read a book" and "have friends over" definitely sound like a patio. We have no idea of your budget but since you're renting, you'll want to be conservative. Fairly economical is some patio stones on a sand base. Dirt cheap is an old, discarded carpet. Sometimes it's used right side up; sometimes upside down.

The place to start is by creating a PLAN ... a drawing (to scale) that shows the existing major features (house footprint, walks, drives, tree trunks, etc) on which you'll add the proposed landscape features ... any paths, patio, planting, etc. Usually one would draw a base plan (showing existing features) and then make copies or use tracing paper on which to work out possible solutions for the various desired elements. The latter is usually an evolving trial and error process. When you come up with something that works, it gets added to the plan. It looks like there's a lot shade in the back yard which is good for relaxation & lounging. You'll want to do some clean up (pruning) before getting started on the plan and assessment of existing conditions in order to make sure that what you plan will work.

If you post the base plan here, viewers will be in a better position to understand what you're working with and able to make better suggestions.

Buy planters that sit on top of the railings and fill them with flowers that will grow in your area including ivy that will trail down. Use some pots of flowers around a defined area that you'd like to claim as your space. You might also find some good buys on Craigslist for an umbrella table and chairs...space allowing.

I made a temporary patio by laying down landscape fabric and then putting cedar wood chips on that. I had a patio swing on top of that. You could also fit cement brick pavers in between the mulch, or do as YV suggests, use sand on top of the landscape fabric and then put in pavers. Here's a photo of a small patio I took out of my backyard after I bought the house.

Think about a structure for shade, some kind of flooring for bare feet, comfy patio chairs/ lounges, tables, accents, water features, and plants... either in-ground or in containers.

On a budget?... Target, Home Depot and Lowes are good starting points.

For example, this is a small 11'x19' apartment concrete back patio turned into a small garden oasis. It's all about the "vision" and creating a beautiful space:

Small Back Patio Oasis - View 5 · More Info

Small Back Patio Oasis - View 13 · More Info

Small Back Patio Oasis - View 1 · More Info

See project links for more photos.

This is a small patio that the homeowner did himself. It looks super involved but we promise, it was actually quite simple. You could even do a little patio and buy a firepit instead of building a stone.