Lampshading is a term with several different definitions associated with it, the most widely known being the practice in the movie- comics- and other entertainment genres, where it is used to highlight elements that are overused, clichéd or obvious points of critique for the viewers.
“Lampshading” is the very act of highlighting these kinds of occurrences in a kind of self-conscious display of irony.
The term may also refer to women, wearing oversized t-shirts, and extremely short shorts, that result in them looking like lampshades.
The term, used in the entertainment industry and storytelling is one, that’s origin is shrouded in mystery, as no one really knows who came up with the analogy.
The similarity between the act and the object is that we call attention to the source of the disturbance and add something to it to make it appear or feel more smooth.
In terms of the fashion expression… it is just the visual resemblance that is linking the big t-shirts to lampshades.
The term has dozens of different definitions on Urban Dictionary, ranging from 2003, up to 2020, all approaching and interpreting the expression from a different angle.
Some highlight the association of a lampshade with dimness and defines it as a slang word for doing some kind of drug or just being plain stupid.
“Lampshading” is a peculiar expression with lots of meanings, all applicable in accordance with the context.