I think it's sort of a vague status thing, as it is something you pretty much have to get in the US.
If I ever want to buy someone a gift and I don't know what to get, I opt for a GAP t-shirt or sweatshirt--always received as if the only thing the person would have ever wanted!
I've actually come to resent seeing those big bold letters, lately. I went to the Chascomús airport the other day, and out of ten guys hanging around, seven were wearing GAP sweatshirts! And it wasn't a group of friends or anything, just totally coincidence! I felt like I was witness to some weird little club, and although it was probably just further coincidence, I was sure that the GAP-wearers were friendlier to each other and the others a bit left out!