Ever since I started playing FFVII about seven-or-so years ago, I always thought it looked like Aerith's dress was made of denim.
I know the Playstation dosn't do textures very well, but that's the impression I get at the end of every battle scene.
I guess it would be more appropriate than any other material, considering she's lived most of her life in the slums of Midgar... it's durable and hard-wearing.
What do you imagine the other characters clothes are made from?