Nope, it is formal wear to use when in cities. When I am out questing and adventuring I use my Steel Plate Armor.
I do the same actually. Rashir is an assassin, but I find it almost impractical to walk around cities in flippin Nightingale Armor and Dark Brotherhood armor.
So he wears his assassin clothes when out in the wilds of Skyrim. And the cities he is disguised as a common person.
He wears the fine clothes I like the grayish silver with a necklace and some rings and some gloves and ragged boots. I thought the ragged boots gave him some character. I like the idea of someone who is disguised to fit with the common folk, but there is something off about their apperance that gives away a possible deadly secret. Like the ragged boots, anyone could go out and buy better boots even the non fine inexpensive boots.
But I like to think that he has worn them down training or something. Like even when he is a common person disguised he may run into trouble and kick butt.
This is http://i1129.photobucket.com/albums/m507/Dream_Sequencer/Photo0010.jpg, it's the Dragon Priest mask that increases lockpick, sneak, etc. With the Nightingale armor.
This is http://i1129.photobucket.com/albums/m507/Dream_Sequencer/Photo0011.jpg, it's the fine blue clothes [he actually got them for free, lol] with a necklace that gets him better prices.