What does it mean when it says in act 2 scene 7 that the Duke and his lords are dressed like outlaws?
The stage in a theater like The Globe was quite plain. It did not have curtains or allow for much in the way of props or decorations. Shakespeare relied on costumes to create the sort of setting and atmosphere he wanted to imply. For instance, in a court setting he would naturally have all the characters dressed like royalty and courtiers. Even today these plays are often enacted in public parks where only the costumes can suggest the setting. In As You Like It, the Duke and his followers are dressed in very informal outdoor clothing. In the directions at the beginning of Act 2, Scene 1, the Duke and several of his followers are said, in some editions, to enter dressed as "Foresters." The directions at the beginning of Act 2, Scene 7 calls them "Outlaws," but only in some editions. Perhaps the best idea of how these men are dressed can be obtained from Act 1, Scene 1, where Charles talks to Oliver about the banished Duke.
They say he is already in the Forest of Arden, and a many merry men with him; and there they live like the old Robin Hood of England.
The Duke and his followers would be dressed somewhat like Robin Hood and his Merry Men. They really are outlaws because they are living by killing deer which presumably belong to the king. They are poachers. The costumes would be as imagined by the designers. They could be described as foresters or outlaws or hunters. We usually imagine Robin Hood wearing a tight-fitting green outfit. Perhaps the green is for camouflage when he is hunting deer. It could also help him in hiding from anyone seeking to arrest him. No doubt the Duke and his followers are dressed the way the costume designer and the audience would have imagined old Robin Hood of England, a sort of well-dressed, swashbuckling outlaw and hunter, or elusive highwayman. There would be a very distinctive contrast between their present apparel and what they would have worn at court. Shakespeare did not have to give detailed descriptions of costumes because he directed his plays and owned all the costumes.
You have heard the saying "the clothes make the man", no doubt. Though in modern times this has changed to a great degree, with individuality of expression being emphasized, in Shakespeare's day you dressed "right" or not at all.
The well dressed Victorian gentleman would dress according to a prescribed way. He would wear good quality leather shoes, typically made to order; stockings, or at the very least wool socks, covered the legs from the shoes to the bottom of the pants; a coat of a certain length hung down the back; a cane or walking stick; a hat perched on his head; etc...
These rules were only flaunted by the very poor, who shopped in second hand stores, or "outlaws" who would dare to change the styles, or have no "style" at all just throwing on clothes for comfort or to suit their own personal taste.
Therefore these characters in Acts 2 scene 7 are dressing in a way that differs from the "norm." They don't necessarily have on masks, as the term "outlaw" conjures to the modern mind, they are just noticeably different.