I prefer to wear cycling specific clothing, and most of it is on the tighter side. Most of my jerseys--although not all--stay drier and are better ventilated than your avergage cotton t-shirt. I'm a "sweater" so that's important to me. I also utiltize my back packet for things like kleenex, maps and food. My bike pack is usually full with other things, so the pockets help.
I also don't like the feel of excess fabric blowing in a stiff wind so my jerseys fit close to my body and, in summer, I tend to wear sleeveless jerseys (and lots of sunscreen) with build-in bras. I am not a huge fan of team jerseys or jerseys with lots of "stuff" on them. I stick to fairly simple ones, like Shebeest's "retro" style. Lycra shorts with a good chamois are a must for me. I can't imagine three or four hours in the saddle with anything else. I prefer the longer styles though. I like the "lock and load" feeling of Pearl Izumi's Ultrasensor shorts. The material is more substantial than other shorts I've tried and they have an 8 inch inseam (I think). I also love to wear PI's Sugar knickers.
I have clipless pedals, and I prefer road over MTB shoes. I've never tried to ride--at least as an adult--in anything else so I don't know whether regular tennies would bother my feet. I also like cycling socks, in part because they're fun, and more importantly, they tend to be thinner and more absorbant than regular cotton socks.
Gloves are must. If you fall, they will help save your hands, and they cut down on the discomfort of a long ride. Sunglasses are an absolute must. Sun damage is an issue, as is debris, bugs and the like. Last week something really hard pelted my sunglasses during a ride. I have no idea if it was a rock or what, but if it had hit my eye, it could have done serious damage. I don't necessarily think you need cycling-specific glasses, but you definitely want something that blocks 100% of UV rays and that won't slip off your nose if you're sweaty. I also prefer polarized glasses to cut down on glare.
I'm also a big fan of things like arm and leg warmers, to deal with variable weather. I used to laugh at all the cycling specific stuff when I saw cyclists all decked out, but I'm pretty convinced now that just about all of it serves a legitimate purpose. Of course, it's all about your own comfort. Some things, like cycling specific shorts, really do make cycling more comfortable if you spend a lot of time in the saddle. Other things like gloves are designed to prevent injury. The rest of it, however, comes down to personal preference. If you feel self-conscious, then you aren't going to enjoy the ride.
Live with intention. Walk to the edge. Listen hard. Practice wellness. Play with abandon. Laugh. Choose with no regret. Continue to learn. Appreciate your friends. Do what you love. Live as if this is all there is.
--Mary Anne Radmacher