According to this article in the German news magazine Der Spiegel, 'Bavarian folk costume is experiencing a sales boom'. All over Munich, we saw shops selling the traditional full-skirted dresses, to be worn over (extremely) low cut white blouses. The aim seems to be to create a shelf of your bosom - handy for resting steins of beer on, I suppose.
My friend Wiebke confirmed that the locals all wear them for Oktoberfest and also at special occasions - she has two. She also advised that the authentic look is the long dirndl - if you wear the mini skirt version, people will spot you for a foreigner instantly.
A dirndl won't come cheap: upwards of about €200 for a fairly basic version, with prices in the thousands for a hand-sewn dirndl made of silk.