From: Justin Gartner
The basic idea is that an Alpha Channel determines the Opacity or Transparency yea?
Yes, and it works per pixel, meaning each pixel in the alpha channel controls the opacity/transparency of the same pixel in the image. So, if you want, say, the upper left corner of the image to be transparent, make sure the upper left corner of the alpha channel is black. If you want a spot in the middle of the image to be opaque, make sure that exact spot in the alpha channel is white. Etc.
From: Justin Gartner
So what Color do I need to make the alpha channel so that my skin is visible?
The avatar's skin will be visible through any parts of the clothing that are transparent. So if you want to see the skin of the avatar's forearms, for example, make sure the forearm area of the shirt texture is black in the alpha channel.
From: Justin Gartner
Black or Grey?
Black means full transparency. Gray means partial transparency (translucency).
From: Justin Gartner
I see explanations of alpha channels but nothing really about clothing.
Did you read the tutorials in the second post? They all walk through an example of making a bikini top for an avatar.
Robin's tutorial that Rolig linked is excellent as well.
But in any case, I would encourage you to stop thinking of this stuff as somehow being either clothing-specific or not-clothing-specific. The principle of how alpha mapping works is what's important. The subject matter of the imagery in question is secondary.
As long as you keep looking exclusively for subject-specific answers, you'll continue to struggle. Learn the principle, and then you'll be able to apply it to any subject you want, whether it be clothing or anything else. Make sense?