。
She was wearing an ugly dress.
Literal
She [topic-は] ugly dress [object-を] was-wearing.
醜い (みにくい) is a strong word meaning 'ugly' or 'unsightly' — applying it to clothing is a harsh judgment. ドレス is a loanword from English 'dress.' 着ていました uses the polite past progressive — she was in the state of wearing the dress at the time being described.