AppearanceTooltip shows you the appearance of items that you see, to help you know whether you actually want to obtain their delicious appearances for your collection. It does this by attaching a Model frame to the item tooltip, showing your character wearing the item.

It can also show an icon in various places to let you know whether you know this appearance or not. These places are:

Bags (including various bag addons)
Loot window
Encounter Journal
Merchants

The icon will be violet if you can learn the appearance on the current character, blue if you know the appearance but from a different item, and yellow if you don't know it but it's for another class.

Less importantly, it also improves the default UI so that the "You don't know this appearance" messages will appear on items which don't apply directly to your class! This means you'll be able to log into your Warrior, and tell that your Priest doesn't yet know this cool BoE appearance that just dropped.

Config is in the Interface Options, or type /aptip

You can choose whether to:

Show your character with your current outfit, or naked apart from your previewed item (how lewd)
Zoom in on the item you're previewing
Strategically remove some items from your character to show the previewed item (e.g. for shirts, remove your chest and tabard)
Only show for items your current character can actually transmog to
Spin the model / move it with the mousewheel

Addons integrated with: