There's recently been a flurry of activity at Pod1 h.q. meeting with various developers of online outfit builders. The principle behind all of these is pretty straightforward: allowing customers to virtually try something on and mix and match with other items is that one step closer to the real experience and will therefore lead to an increase in conversions...that's the theory anyway.
Some of the better ones I came across were:
Schway
A simple mannequin experience that can be quickly and easily dressed. Nice layering functionality means you can see how items look when worn over each other - something not all systems I tested could do.
http://schway.net/

Boden USA
I really like this. Works straight off the listings page with a real model. Limited stock of course but certainly has the impact.
http://bodenusa.mixmatchme.com/MME/bodenusa/home.aspx
Republic, using Polyvore
This was more of a scrap book then an outfit builder but accomplished the task i.e. to mix and match items and see if they work together. Additional functionality to resize items was pretty good.
http://www.republic.co.uk/page/outfitbuilderwomens
No Need 4 Mirrors
A system utilised by Oasis, Karen Millen, Coast and Lipsy amongst others.
http://www.nn4m.co.uk
They all have their pros and cons but I'm actually yet to be convinced. Lack of product range, unrealistic visualisation of the body/face, inability to change skin tone, body shape and most importantly the arguably clunky technology (it's flash but it's not exactly a seamless experience).
It's early days so would be great to hear if they are working for brands to deliver incremental revenue. I do think for systems like this to really work however, there needs to be some sort of standardisation of how these mannequins/avatars pull in data so retailers can integrate image dimensions into the standard photography schedule.
So calling all developers and innovators: create a common micro-format for this technology so that these outfit builders become truly useful and actually add value to the online shopping experience. One day this will be cracked, and hats off to those who've already attempted a system, but i think we're still in Outfit-Builder 0.5 with 1.0 coming our way towards the end of the year.