I've heard that sometimes, too. Often I will just smile and acknowledge something that I like about their outfit.

It may just be that you are a leader and a trendsetter!

I think usually the person is reflecting more on their own life choices than on you. For example I am a very conscientious eater and at dinners out I hear things like "Oh you're so good" as the person saying it makes a less than healthy choice off the menu. A similar comment comes when they find out I run or exercise. Usually it just means that they think they should do it too.I try to quietly go about my business and not make a fuss about my choices. The way I look at it is we all have choices in life and the only choices we can make are our own.

I would take it in a positive light:
If someone came and said "You look good?" it does sound vague (good?in what way?), whereas if someone said "You're so dressed up!" it's more like "You look beautiful and I like the way you've styled your clothes!"

Well that's how I would process it anyway

Just say thank you and smile!

I know exactly how you feel, I have also had that comment and others along the same lines like "Are you going somewhere nice?" The one that got me was "You always look so neat" (as in tidy!), not fashionable, or glamourous but neat, oh dear!!!

I agree with all the ladies that say that they just smile and say "Thank you so much" and have great admiration for those that can come up with a witty answer on the spur of the moment.

Being a Mom it's hard to think too much about dressing up on a daily basis, especially if I'm just going to the playground and the grocery store. After all it takes more energy than you can imagine to chase down a toddler and get him dressed let alone myself. So I am especially in awe of Moms on the playground that look put together. I have my standard workout gear on (because walking to the playground is part of my actual workout).

There is a lady that lives next door to me, she's a lot older maybe in her 60's. I wouldn't call her fashionable but she is very well put together, always! Even out working in her garden she looks nice in her house frock with charming slippers and a cute apron. Her hair is always coiffed, she's always wearing jewelry and make up and when I see her walking to the grocery store she's as dressed up as I would be for church. It's inspiring to me.

Once, before I felt the need to be fashionable, I gave my BFF a compliment on an her outfit. She said "thanks, I've been cooking up this ensemble for weeks!" and it made me realize that I needed to put a little more effort into how I look.

I don't think the comment is meant to be snarky. We live in a casual world and people just notice if you are dressier. I usually say "thanks, I have fun dressing up" and try to compliment them on something about their outfit since they may be feeling insecure.

If it's me I might say: "That's all I have" and just smile

This comment used to throw me too and make me uncomfortable. Now I just respond with a vague, "You think so?" as if I am preoccupied with something else. It usually ends the conversation right there.

Since American society has become more and more casual, I honestly don't mind if someone thinks I'm overdressed. My best response is always, "Thank you." A big, broad smile to accompany the response drives the point home.