Modesty isn't concerned with clothes, it's concerned with bragging. If you'll wiki the traits, you'll notice that modesty involves "is very willing to compare himself favorably with others". This is in the form of "he's so modest, he never brags about his success" not "don't look I just got out of the shower". If anything, most of these (should) apply to personal interactions. Most dwarves make friends, some become enemies. The speed of friend-making and the chances of becoming enemies (or lovers) depends on the dwarves' personalities. Presumably, a dwarf who doesn't like crowds would be put off by someone who's boisterous and brags.
For the most part, these are unused though. There's a lot of personality tags that are currently useless, but Toady has mentioned in a Talk that he wants to expand. He said something like "you see all of these dwarves, and they've got personalities written down, but right now it doesn't really matter, they don't really do anything. We want to do that, later, have them actually feel and react to things because of their personality." I think a large part of this would be situations where you carve a statue. If it's the militia commander striking down a badger, then the militia commander may love it if he brags a lot. If he's modest, he may get less of a thought from it, or actually not like it at all. As it stands, all dwarves are pretty much identical, but when personalities get really worked on, there should be a lot more individual perks.