The first time I went, I did 2-1/2 days. As I drove away, I started planning my next trip. The second time I went, I did 4-1/2 days. As I drove away, I started planning my next trip. My next trip will be a good 7 days minimum. :)
Yes, you can "do it" in 2-1/2 days. However, you will be spending all your time doing the attractions and very little time spent watching the falls and experiencing their power. It also doesn't give you much time to see the surrounding area.
Some attractions in Niagara Falls worth doing:
Boat tour (Hornblower on Canadian side; Maid of the Mist on American side - they are the same)
Journey Behind the Falls (Canadian side)
Cave of the Winds (American side)
White Water Walk (Canadian side)
Spanish Aero Car (Canadian side)
Goat Island and Three Sisters Islands (American side)
Whirlpool Jet Boats (Canadian side; also Niagara-on-the-Lake, Canada and Lewiston, US)
This is just the falls/water activities. There are also lots of historical sites in the area worth visiting.