(See today's Ophelia's Gaze for a discussion of this issue that is more balanced and includes some photos that show just how good mesh avatars and clothing can look!)
Alas, mesh clothing has a problem as things stand now. They can take into account your skeleton, which is affected by some of your appearance settings (height, leg length, torso length, et al.), but not by a lot of others (e.g. body fat, love handles, breast size). Apparently the current solution is to use an alpha mask to hide the parts of your body that mesh clothing is supposed to cover, so that it will appear to do so even if you have, for example, a shape that makes Sir Mix-A-Lot happy. In other words--currently you have to adapt your shape to mesh clothing.
If you want mesh clothing to fulfill its promise, I join Ophelia in urging you to vote for and watch JIRA issue CTS-693. (LL hasn't taken away voting as it seemed they would earlier, but my understanding is they pay a lot more attention to people willing to put up with the email generated by an issue, which is what watching entails.) This proposal will let mesh clothing take your shape into consideration, so that it really fits around you. If you want serious booty, you should be able to have it, and your clothes should work with it rather than forcing you to hide it.
(UPDATE: CTS-693 has apparently been moved to an internal LL JIRA, so the above link is broken. In the publicly visible SL JIRA, it received over 470 votes in a few days.)
Now... the meshophobes will no doubt point and laugh, BUT... as we've pointed out (perhaps more times than you care for if you've read this blog for long) the current painted-on clothing has an issue with adapting to one's shape as well. It "fits" your shape, all right--by being stretched or shrunk to fit. It's as if in RL you went to buy clothes and found that everything was made of rubber and made for a size 6. You get to put it on and stretch it to fit over the appropriate portion of your body, with the pattern stretching and blurring as well. Real clothing actually uses more cloth for larger sizes! Clothes should have the opportunity to adapt to your shape, including the cloth patterns. Please also consider voting for and following JIRA issue VWR-10839.