I don't know, I think it's different if you are applying for a job in a big corporation or for a smaller firm/startup. Bigger firms will usually have a more strict dress code (the place where I currently work short pants are frowned upon, except in case of system integrators)
In both cases I usually go for jeans/shirt combo (but not a t-shirt, bigger firms/older people find it unprofessional in my experience), but that's just me.
When people say "dress one level above the job you're applying for", I can't help to imagine what the levels are. I came up with something like this, from high to low:
- 3 piece suit
- 2 piece suit with tie
- 2 piece suit, no tie
- suit pants and dress shirt
- khaki's and dress shirt
- jeans and dress shirt
- jeans and t-shirt
- shorts and t-shirt
- stained shorts and wife beater shirt
I always wonder where the bow tie fits in though, or are they just always inappropriate?
Bow ties are generally considered formal evening wear, not business attire, much like tuxedos.
I'd also actually put the 2 piece suit with tie over a 3 piece suit (with or without tie) in terms of formality/business-attire-ness: 3 piece suits are also not traditional business wear, while 2 piece suit+tie is the IBM/'50s iconic business look, and what you'd see most CEOs/etc. wearing.
In both cases I usually go for jeans/shirt combo (but not a t-shirt, bigger firms/older people find it unprofessional in my experience), but that's just me.