Heres the point: Maybe you have the best armor in the game,but,you'd rather where a clown suit and a cowboy hat to make youre character look funny (this is just an example). You'd have your normal armor slot for youre amazing armor you love so much. THEN a vanity slot for stuff you want on youre charecter but they have bad stats. The vanity slots if left opened with no other armor or vanity item, will show whatever you have UNDER that slot. Make sense yet???
Why not have vanity slots exactly like Terraria had it, but give people a personal option to toggle whether or not they see vanity items on other people? I'm sure it wont hurt anyone if a few people choose to see what's underneath instead.
These have been confirmed dammit! In one of the screen shots(couldn't find it) it shows you slots for armour and vanity