I would go out tonight, but I haven't got a stitch to wear

This is what I wore out to walk my dog today, and it started me thinking about conscious fashion choices vs. inadvertent "fashion statements". Obviously, this is not an outfit I would normally wear in public. For reference, this is about what I wear on any given day when I'm just lazing around my house and I'm not planning on going anywhere; I don't really like pants very much, so I wear a jersey mini skirt, which I guess is basically the skirt equivalent of sweatpants, and a t-shirt because, well, duh. So when it was time to take my dog for a walk, I was too lazy to do anything beyond putting on a hoodie and uggs. I mean, I am not even wearing socks; that's how lazy I am. My dog is approximately one hundred years old, so we're talking a walk around the block here, and it's above zero, which is pretty darn warm for February, so I figured this was an acceptable dog-walking outfit, but maybe I was wrong.
While I was walking, I notice almost everyone that drove past me giving me really weird looks, and the one lady I ran into that stopped to pet Ace sort of looked at me like I was nuts. Basically, what I'm trying to get at here is that I think people, generally, assume certain things about a person based on what they're wearing. This isn't news to me, obviously, but I've always kind of assumed that if a person is going out in public, they've thought about what they're wearing, and what assumptions others may make about them based on their sartorial choices, because I know that I do. But today I realized that a lot of people have a different "line" than I do. For example, I draw the line at looking sloppy (like wearing sweats or uggs with a mini-skirt and no tights) at walking my dogs; I wouldn't even go to the drug store dressed like that unless I was super sick and picking up cold medicine. So perhaps the people I see wearing sweats or lulus at the mall just have a very different line than I think is acceptable, and are not, in fact, the giant slobs I assume them to be. Or maybe they are, but is it fair of me to assume that about someone I don't even know?
I'm wondering: where is your line? What do you think is acceptable for someone to wear in public?