Okay, my own thoughts on this...
First of all, not all of us live in NYC. Not all of us can go to the theatre "when we feel like it" for a show just like people go to movies. Not all of us have that luxury.
In case you didn't guess, I don't live in NYC. I am very, very, far from NYC. Thus going to see a show is a rare but thrilling occasion when dressing up just enhances the experience. As someone said earlier, it makes it more fun. It makes it feel like a night out. It's like why I prefer seeing evening shows to matinees: it's all about the atmosphere.
I've never seen a show on Broadway, but if I got to attend one I would certainly dress up. I dressed up when I saw a show on the West End during my trip to London. Heck, I dress up for community shows. I think it's a sign of respect.
On the subject of general theatre ettiquette, I think that the worst offenders of that are RENTheads. When I saw RENT, there were people standing in the front row dancing and singing along. I wanted to smack them--this isn't a freaking concert! Lea Salonga was once asked what she thought of RENT, and she said that she didn't know because when she saw it, it was hard to hear because of the audience.
Jimmy, what are you doing here in the middle of the night? It's almost 9 PM!