Teens use their appearance as a way to explore who they are (not define who they are). If you give them a few months, they'll move on to something else. Most forms of experimentation are relatively harmless; you just have to determine your own tolerance level.
Maybe you can handle almost any color of fluorescent hair, but you have a lot of difficulty with your daughter wearing miniskirts and go-go boots to school. Or maybe baggy pants that droop around your son's feet make you afraid he's going to fall on his face. As particular issues arise, have frank discussions with your teen.
If you're dismayed by the appearance of your teen's friends—and don't like the look that she wears to fit in—observe her group long enough to determine who they really are. It could turn out that your teen is hanging out with a great group of kids whose individualistic clothing reflects their creative and imaginative spirit. If, on the other hand, it turns out that her friends actually are bad influences, refer to Teens and Partying, and Talking about Drugs and Alcohol for more information. Remember to always start by listening to your teen. She may be doing better than you think.
She may half-agree with your concerns about her belly-button-baring halter top, so she might not be as upset by your comments as you think. (Don't expect her not to stomp around about it, though.) Or at heart your son may not want to go along with his friends, who've decided to wear Metallica T-shirts instead of dress shirts to graduation. You may be doing him a favor by making him able to say, “My parents made me change.”
Remember, too, that there will be plenty of other voices commenting on your teen's fashion. Right now she's most concerned with how she appears to her peers. Those peers may be tolerable “adjusters.” Just as the kindergarten girls had no problem telling her why she “just couldn't wear red socks with a pink skirt,” they'll do the job now, too. And if her friends look halfway decent most of the time, you're in for smooth sailing.
Maybe you'll get to drive the carpool one day when one of the kids gets in the car sporting a new fashion. Listen carefully to the conversation as the others view her coming down the walk and then listen to what they say when they greet her. (You may feel pity; most teens are affected by catty comments and may be hurt by what's said.)
Ultimately, you have to acknowledge who is really in charge. In high school, how many of your friends brought along “forbidden” clothes and changed into them as soon as they were out of the house? If your rules are too strict, you'll lose before you've begun on the important stuff.