classic and new mesh avatar

If you using the Classic  avatar 

at this moment you can not remove all your clothes because you wear one of the default skins where underwear we can say are a part of it with simple worlds. To remove all your clothes, you need to change skin. If you search in your inventory you can find 1-2 skin of your default ones which offered for nudity. Alternatively ask a friend to give you a free skin in world, or buy a new one at Marketplace

When you feel rich enough to buy a good skin, you can go shopping and find one that suits your self image and has all the proper features where they belong.  Although you can find surprisingly good skin for low prices, expect to pay upwards of L$1,000 for a quality skin.  Keep in mind that L$1,000 is just about $4 US, so that's really a cheap investment in your appearance. Also keep in mind that a good skin will only look right when it is matched to a shape that also looks like you, so don't rush into a purchase until you have had plenty of time to play with your shape.