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The first and most important thing you need to know about what to wear in San Francisco is that the city is colder than you think! Despite being in California, San Francisco is often hit with seemingly unexpected bouts of chilly fog and wind at different points during the day (particularly during summer). Visitors frequently fail to bring enough layers or a jacket, so make sure you pack an extra sweater and bring it with you as you are seeing the sights.
In terms of clothing style, almost anything goes. Historically, a San Franciscan wasn't dressed to go downtown unless men wore hats and women wore gloves. Since then, attire has ranged from "hippie" to "avant-garde chic." Although San Franciscans often pride themselves on being cutting edge fashionistas, a quick scan of a cadrie of typical residents will reveal a number of common themes --lots of black, leather jackets, and comfortable but fashion-forward boots and shoes for navigating the City's numerous hills.
California is much more casual than the East Coast or Midwest. If you want to be spotted as a tourist, don shorts, tennis shoes and a tank top on your trip to San Francisco. Another dead giveaway as to whether one is a tourist is the common "San Francisco" jacket from a stand at the Wharf... purchased typically because one has not listened to the warnings that July in San Francisco is actually quite cool. A native would leave the shorts and tennis shoes for a round of tennis, except perhaps in the Marina District where shorts and one's alma mater sweatshirt are de rigueur for Sunday brunch. The tank top would make the cut except that it would be paired with jeans and perhaps a leather jacket or worn under a tee shirt or sweater waiting for that hint of sun to make it's debut. San Franciscans have some basic fashion tenets that any visitor to "The City That Knows How" can quickly assimilate for a trip to the Left Coast.
That said, anyone can wear just about anything (or nothing if you are so inclined) in San Francisco. Most residents upon encountering even the most outrageous attire or occasional nudity will just smile quietly to themselves and mutter "only in San Francisco!"