If my DC (4 and 2) are going to a party, I always put them in their 'party clothes'. This usually means like a little patterned shirt and chinos for my DS and a dress or frock for DD. But I've noticed that loads of people these days tend not to dress their kids up. Even for their own parties? No judgement here whatsoever, I guess it's just what kids are comfortable in but my DS loves dressing up in his party clothes!
I'm not including soft play or fancy dress here, obviously.