According to “Yoga Undressed” web site:
Naked yoga, in it’s true form, has very little to do with sex and eroticism.
Naked yoga originated with the Naga Sadhus, a sect of Yogis in India, dating back to the 8th Century BC. Their name describes the philosophy and thinking that is central to their approach to yoga and spirituality. The word Naga means “naked,” and the word Sadhu, “one who has renounced the world completely.”
Nudity on the part of the Sadhus is a symbol of renunciation of all things material; symbolically, by renouncing their clothes, they renounce ambition and any attachment to objects, emotions or desires. There is a sect of the Sadhus that even renounces sex and embraces celibacy and learns to face the harsh elements without concern for physical comfort or satisfying human desires, including the freezing cold of the Himalayas, where many of them reside. These acts are meant to help break the attachment and identification they have with the physical body and sense organs, and allocate energy and attention towards utilizing the body as a means towards reaching enlightenment.
The real meaning behind nudity in the yoga practice, specifically, the Sacred Tantric Practice in Yoga Undressed, in its purest form, describes the resolution of conflicts between the opposites in life–finding the perfect balance between the deepest and most complete connection to the body, while simultaneously cultivating absolute detachment from it, in order to encounter the eternal soul essence, or the pure energy of creation. The purpose of yoga is to create a vibrant, powerful energetic connection to the body, but not as obvious is the goal of detachment from the body, the recognition of the body as a temporary dwelling place for the soul. A true naked yogi, then is one who has shed his coverings, not only his clothing, but his attachment to the myriad and insidious aspects of all human drama and resides in and embraces his pure, untouched, infinite nature.
Naked yoga removes any sense of restriction from clothing, promoting a greater sense of freedom during asana practice and thus, an enhanced awareness of the body. Seeing and feeling the body as you stretch and move from one posture to the next, inspires a more mindful, connected practice. When we consider the role that clothing has played in society, it seems to be in direct opposition to the spirit of yoga, which speaks to “oneness” and union. By design, clothing reminds us of our differences. It serves as a distraction that leads us away from a central yogic principal, the commonality of all living things which inspires peace and compassion.