According to the popular story, Lady Godiva took pity on the people of Coventry, who were suffering grievously under her husband's oppressive taxation. Lady Godiva appealed again and again to her husband, who obstinately refused to remit the tolls. At last, weary of her entreaties, he said he would grant her request if she would strip naked and ride through the streets of the town. Lady Godiva took him at his word and, after issuing a proclamation that all persons should keep within doors and shut their windows, she rode through the town, clothed only in her long hair. Only one person in the town, a tailor ever afterwards known as Peeping Tom, disobeyed her proclamation in one of the most famous instances of voyeurism. In the story, Tom bores a hole in his shutters so that he might see Godiva pass, and is struck blind. In the end, Godiva's husband keeps his word and abolishes the onerous taxes.
The oldest form of the legend has Godiva passing through Coventry market from one end to the other while the people were assembled, attended only by two knights. This version is given in Flores Historiarum by Roger of Wendover (died 1236), a somewhat gullible collector of anecdotes, who quoted from an earlier writer. The later story, with its episode of "Peeping Tom," appeared first among 17th century chroniclers.
At the time, it was customary for penitents to make a public procession in only their shift, a sleeveless white garment similar to a slip today and one which was certainly considered "underwear." Thus, some scholars speculate, Godiva may have actually travelled through town as a penitent, in her shift. Godiva's story may have passed into folk history to be recorded in a romanticised version. Another theory has it that Lady Godiva's "nakedness" may refer to her riding through the streets stripped of her jewellery, the trademark of her upper class rank. However, both these attempts to reconcile known facts with legend are weak; there is no known use of the word "naked" in the era of the earliest accounts to mean anything other than "without any clothing whatsoever." (from Wikipedia)