I always found it a bit amusing.
In ancient Greece human form was glorified, and depictions of naked men and women decorated many public places. This was also true to Rome, although to a lesser extent. Even Gladiatorial and Olympic competitions were in nude.

Of course, clothing predated all that. Originally intended to protect us from the elements, it also very conveniently concealed some 'imperfections' of our bodies and as time went on it began to represent our social status, taste, and even political affiliation. Over millenniums we have grown so attached to the conveniences it provides, imagining people going about their day naked seems absurd now. Like turtles without shells.

The spread of Abrahamic religions didn't help nudity either. It further cemented the notion that nudity is taboo - a sin even. God hates when people don't cover how they actually look, or chop a piece of skin from their genitals or whatnot.

I think the western world is very slowly sobering up and nudity becomes more tolerated. Of course, nudity still bears the mark of guilt and obscenity that peer pressure and religion has placed on it. It's precisely why it's "naughty" and why she has been a "bad girl" and will be punished tonight. It's burned in our psyche.

"Think of the kids!" they yell. The kids will feel whatever society tells them to feel about nudity. If they sense it's deemed immoral and obscene, they will in time adopt exact same view. Many of the indigenous people in warm parts of the world don't wear any cloth whatsoever, and i doubt it messes them up mentally. Even in civilized parts of the world.....If you've ever been to a nudist beach, you surely noticed that people there stopped regarding nudity as anything out of the ordinary. You were one of the few noobs there who got a boner. That's because, as i implied above, our perception is largely shaped by our peers.
Now if a man/woman walks outside naked (especially if they are sexually attractive) it would cause quite a distraction. However, this is only due to reason i stated above.

So yeah, there. Discussion was becoming stale, and this was the only thing i could think of at the moment.

PS: Honestly though, i just felt like putting tits in my avatar.