Grreat topic. I make almost all of my stuff and for my troupe. All asindividuals.
And it can be complicated, I can be inspired by fabric, or a color, or a mood, or the music. All of these things inspire me at one time or another. Sometimes an idea comes in a dream and I see how to make it. Sometimes the other dancers in troupe visualize what they want and we collaborate to get done. I'll post a couple I have done here. I also like to push teh envelpe on our Belly Dance costumes, some traditional, some fusion/goth/tribal.
I have special costumes I waer when I dance with my snakes that are safe and comfortable for them to crawl over.
I try to express my iner self with my dance and costuming. even my dark side Muhahaha!

And I do think that what you wear practice in makes a difference, if you feel comfortable and feel the part yo uput more into your practice. I sometimes waer a full costume to teach in to show students what costume possibilities there are. And how differently each costume moves when you dance.

I make almost all of my own stuff.
I make costumes for many reasons. Sometimes I need a costume for a specific purpose. For example, when I danced with Snakes Rising on the White and Red tours, I needed a white and red costume respectively. So those outfits were designed with the show's theme in mind. When my troupe decides on a particular look, I make pieces that are needed to match.
Other times I find a beautiful object that MUST become a costume. Last time I was at Jo-Anns, in the clearance section I spotted a black chiffon with hot pink sequin butterflies... I had to have it ALL... but there wasn't much, so it's going to become a square overskirt with matching sleeves.. That means I'll need a new black skirt, maybe with a matching hot pink ruffle, and a hot pink top, maybe with black lace and sequin appliqués.... Or maybe not.. it depends on what materials come my way...
Another reason is to experiment.. my now-stalled pants project, for example. I wanted to experiment with bell bottom pants. I wore them daily back in the 1970s, so I might as well try them for dance. I started making a pair out of a purple velvet dress, just because it was handy when the urge to sew struck. I made my Ghawazee costume just because I wanted to experiment with that look.
Other times I make things because I have almost all of an outfit, but it's missing *something* ... like an extra skirt, or maybe different sleeves...
Sometimes a particular song will trigger an image or story, and I'll create a costume that helps tell the story.
Or, I just might dive into my stash, see what looks good together, and make or change something. But I usually don't have much time for this option..
It's important to practice in a costume before wearing it in performance. But I don't think it's necessary to dress up for every practice. I enjoy dressing up to practice at home, alone -- but other times I'd rather just throw on a hipscarf and go. Other times in practice it's more important to see the body, to make sure posture, etc. is good. In that case it's better to wear exercise clothes instead of pretty costumes that hide legs, etc.