Covered is the etiquette, including a shirt of some sort (t-shirt or undershirt). Bring light clothing, because many airlines keep the cabin warm (BA and AF I'm looking at you in particular!). I always bring a pair of basketball shorts as my pajamas. Nice to be cool and have elastic.

To me the question is more about when to change into pajamas. I'd rather do so in the terminal but my wife insists I wait so we "don't look like hobos boarding in business class". So I tend to just wait until either just before or just after the meal service.