Holly Stratton's essay on "Graceful Modesty" offers some valuable insight. I started to paste some quotes here, but you really must read the whole thing. The concluding paragraphs really drive the point home by showing the connection between modesty, grace, righteousness—and the gospel. Here's one paragraph to whet your appetite:
If we have grown up in a Christian community where a strongly defined code of dress has been established, we have been exposed to a visual programming of comfort that can easily cause us to equate that specific dress code with godliness. Even our judgments about which clothing choices best identify us as believers can become skewed to that code, prompting us to make assumptions about the messages our clothing send—assumptions that may not match reality.