Hero's New Clothes

The Hero's New Clothes are clothes that Link has worn in some games. They are apparently "invisible" to certain people. The clothes are based on the fairy tale "The Emperor's New Clothes".

The Wind Waker
After a player has completed The Wind Waker, they have the option of playing a "Second Quest". During this second quest, instead of receiving the Hero's Clothes from his grandmother, Link will receive the "Hero's New Clothes", which are invisible to those who are not pure of heart. As of such, Link will appear to be wearing his blue pajamas for most of the game.

It is not known whether or not the Hero's New Clothes were real or not. Evidence suggests that the clothes were real: People comment on the change in Link's attire, his shadow is that of him wearing the Hero's Clothes, and during the end sequence of The Wind Waker, Link is seen wearing the Hero's Clothes. The Great Deku Tree also apparently can see them, as the translated version of his Hylian speech suggests that and he recognizes them as the clothes of the chosen hero.

Phantom Hourglass
The Hero's New Clothes are the clothes that the Man of Smiles gives Link the first time he visits him. In the game, the item image is transparent. When taken to trade to Nyeve, he says he recognizes and sees the clothes that are just perfect for him. He trades Link these clothes for a kaleidoscope.

Trivia

 * After you have finished the game and are "wearing" your Hero's New Clothes for the second quest, the Magic Armor will still show the outline of Link's trademark hat even though he is not wearing it. Some theorize that this is the silhouette of the invisible Hero's New Clothes.
 * Also, upon completing the game again, as Link is trying to swim back to grab the hand of Daphnes Nohansen Hyrule, he is encased in a bubble that conforms to the shape of an invisible pointy hat.