@George,
I was invited to one maybe six years ago? and I'd never heard of it before then.
It was fun -- scour thrift shops for really bad sweaters at for $1.75 or whatever.
Some people made their own.
Then prizes for the ugliest.
I thought my friend who hosted it made it up, but every year since that first one I've seen a few more references/ other parties, and now it seems to be ubiquitous.