Costume battle damage is not new. In 1985’s Ghost ‘n Goblins, Sir Arthur was running around in his skivvies. But in the last few years, it’s become far more prevalent — especially in Japan — and far more feminine.
Straight up, costume battle damage is fan service. It gives players a peek at a character’s more revealing side. Literally.
Square Enix has included it in the upcoming PSP title The 3rd Birthday: the heroine not only wears destructible jeans, but also stockings. As the battles progress, the costumes can become increasingly tattered
https://kotaku.com/the-3rd-birthday-celebrates-new-clothes-5668492
Likewise, upcoming Japanese PSN game Malicious includes costume damage.
The revealing costume damage has proven a sticky issue when these games are localized for Western audiences. Take brawler Ikki Tousen:Shining Dragon — the game’s revealing costume damage caused its Western release to be put on hold over fears of a Mature rating.
https://kotaku.com/no-shredded-clothes-no-game-5261807
『マリシアス』女性キャラでダメージを受けると徐々に服が破れていく仕様 [チラシの裏でゲーム鈍報]