Personally, I prefer to wear clothes and so do the people I cache with.
Ok...for the real answer it depends on the cache. Woods = hiking boots and pants etc, Urban = anything else. I don't do disguises or make up some huge story as to what we're doing. I was staring up into a tree once and a lady walked by asking if I was looking for hummingbirds. I just nodded and said, yeah...something like that. She left and didn't give me any grief. The popo didn't show up and I found the cache. Yay!
Now, if the popo does show up or if someone gets upset about what you're doing you just remain calm and tell the truth. I just don't understand the big hairy deal. (sorry...was looking at nudecachers pics and got distracted)