We've got some pretty cool features planned for our inventory system. We're going to be using a "slotless" inventory system. In practice this means there's over a hundred slots and you don't see them. This allows you to equip many combinations of things, rather than being limited to articles of clothing or armour that cover a fixed part of your character's body.
To make clothes we use a dedicated cloth simulator and other tools we've developed. This allows us to make realistic clothes very quickly and easily. It also allows clothes to change depending on what else you're wearing. For example, long trousers will tuck into boots realistically.
Items will have properties that make sense. You won't be just wearing as many items as possible because they confer stat bonuses. You will wear specific items because they do something useful or because you like the way they look.
Most items you find will be fairly mundane. However a good, well balanced weapon can be a significant upgrade over a crude weapon; an armour made of well tempered plates that interlock cleverly and is well padded can provide a huge advantage in terms of protection, manoeuvrability and even things like insulation. Such items can also carry a high monetary value.
There will however also be a great many items with much more special qualities. These won't be randomly generated items that make no apparent sense, they will have plausible though sometimes quirky qualities, you will get a sense that someone designed them with a purpose. These items will be well hidden and well guarded, they won't just spawn at random. If you defeat an opponent you will be able to take whatever they have equipped and they will have been using this equipment to combat you.