Japanese organizing expert Marie Kondo's advice is to fold almost everything. No muslin-covered hangers, but you can decorate the few hangers you do use with old hair ties and keychains.
Project 333 and similar capsule wardrobe plans tell you to keep only a limited number of items out for use at one time, and no shopping is allowed during the three-month period except right near the end when you're thinking about the next season. This is supposed to make your getting-dressed decisions easier (here's my hat and my scarf, not plural), and may help you to think less about appearances and more about big ideas. A tiny wardrobe can also be a source of more-with-less creativity; or an opportunity for absolute uniformity (t-shirts and jeans). (One thought I have is that the three-month experiment, like a Whole 30 month, may be most effective if you do it only once or twice or occasionally, and follow the rules exactly, rather than trying to follow it longterm but haphazardly.)
On the other side, Marie Kondo recommends doing a major closet purge once, but then keeping most of the joy-sparking remainder available to wear year-round...because clothes, like Toy Story characters, don't like "going in the box." The final amount is up to you, your needs, and your drawer space. One blogger suggested that this approach is perhaps more honest than storing non-capsule clothes in boxes, because you are not just delaying a decision on what to do with them.
Note that this hasn't addressed issues such as fast fashion, polluted rivers, overseas labour, poverty, and shopping addiction. And we haven't even gotten to the rest of the house, the dishes, books, vacuum cleaners, and guinea pig bedding.
So what's a confused home organizer to do?
Michael Pollan's famous food advice is “Eat food. Not too much. Mostly plants.” It's a principle that can be translated into practice. It also opens up discussion. What is "food?" How much is too much? What is "mostly?" What kinds of plants? Where should they come from? But you start with the principle.
So here's an adapted version of Pollan's motto: "Wear clothes. Not too many. Mostly low-impact."
How you hang or fold them is up to you.