3 yr old embarassed about undressing

[Tinkywinks]

Hello, not sure if I'm making a big thing about nothing, but my DS who is 3 and a half, has recently started to get embarassed about getting undressed in front of other people. First my cousin, then tonight, I was getting him ready for bed and my sister was in the room. I took his top off and he curled up into a little ball trying to hide his chest and telling my sister to get out. I just found it quite odd to be honest. He has just started nursery, and a few times now I've come to collect him and he is wearing another top because he got his own top wet during water play. He never seems distressed about this but wondered if it had anything to do with it.
Is he just being a bit odd in the way that toddlers sometimes are? How does he know to get embarassed about nudity?

[editrix]

My DS went through a phase like this at about 3.5yrs. He used to send me out of the room when he got undressed to have his bath and made a bit of a fuss about being naked. I didn't make a big deal of it and just left him alone to get undressed so it wasn't really an issue. He's 5 now, and doesn't do it any more, though I can't for the life of me remember when he stopped! So for him it was just a phase.