Yo Kass answered
If you're expecting the answer to what Italian people wear to be 'slicked-back hair and gold chains for guys, and big heels and designer labels for girls', then you've probably been watching too much Jersey Shore. Having said that, all stereotypes do have a hint of truth to them - and no-one could accuse the Italians of lacking a sense of style.
Italians have an expression, la bella figura, which means something like 'the good figure or impression'. Basically, it refers to the concept of presenting oneself in the best way possible. This concept transcends the idea of beauty being simply about how you look, and instead incorporates the visually aesthetic with good manners, and what is seen as the 'correct' way of doing something.
This idea of la bella figura can mean everything from dressing to impress (even for mundane events) through to setting a table correctly when hosting a dinner-party.
Italian Fashion Labels
We couldn't discuss Italian clothing without a quick mention of some of the 'household names' of Italian fashion. Milan and Rome are globally-recognized as major cities on the 'world fashion map' and are home to some of the world's top fashion houses. A few examples would be: Gucci, Versace, Prada, Miu Miu, Dolce & Gabbana, Armani, Ferragamo, Bottega Veneta, Benetton, Emilio Pucci, Fendi, Moschino, Valentino and Trussardi - to name just a few!
However, the 'heyday' of Italian fashion could be referred to as the time between the 11th and 16th centuries as, interestingly, it wasn't until the early 1950s that modern Italian fashion began seriously competing with the French design houses and their concept of haute couture.
Modern Italian fashion
Having covered the 'designer label' side to Italian fashion, it is important to point out that not all Italians walk around dressed in Armani suits or do their weekly shopping in strapless Valentino evening dresses.
Casual wear will include jeans and GAP-style felpe or sweaters, and sportswear plays a big part in an Italian's wardrobe.
A group of Italians on a school trip, for example, can be spotted a mile off by their distinctive Eastpack or Jansport backpacks and Northface parkas.
Essentially, the kind of clothes worn by Italians are the same as those that someone in the United States or the United Kingdom might also wear. This is especially true nowadays, probably due to the amount of influence that foreign TV shows and movies have on Italian culture. To appreciate this, why not check out the website of one of the most trendy Italian street and casual wear stores: Energie. Even their homepage divides its content into the sections 'preppy', 'urban' and 'rock', which are decidedly 'Americanized' terms (this last point is subject to them not updating their website before you read this).
Italian dress sense
I guess the main thing that sets Italian fashion apart is those fashion styles that are dictated by local trends or endorsements by TV personalities, as these quirks and innovations often don't translate into other cultures.
Every few years, certain trends, brands and hairstyles seem to emerge in Italy, and yet never make it past the country's border. In Italian these are referred to as nuove tendenze or 'new tendencies'.
One shocking example was the resurgence of the mullet amongst Italian teenagers around 2006-2007.
Despite this, walk down any major Italian thoroughfare (like the Via del Corso in Rome) and you're bound to see some head-turningly well-dressed people - and this is probably more the case in Italy than in any other country in the world.
Even on your arrival at an Italian airport, one of the first things you'll notice is the amount of busy men rushing about while wearing perfectly-cut suits.
To sum up, I'd say it's not so much what Italians wear that distinguishes them from the rest of the world, but rather the way they wear it. I know that sounds like a lazy cliché, but it's true!