。
She was wearing a blue dress at yesterday's party.
Literal
She [topic-は] yesterday [genitive-の] party [at-で] blue [genitive-の] dress [object-を] was-wearing.
着ていた is the past form of 着ている — and 着ている itself does double duty in Japanese, marking both ongoing action ('is putting on') and resulting state ('has on, is wearing'). With clothing, the resulting-state reading is the default: she had been dressed in blue, not actively pulling it on. Japanese splits its 'wear' verbs by body region — 着る for the torso (this dress), 履く for the legs and feet, かぶる for the head, かける for eyewear — so vocabulary here forces you to know what part of the body you're dressing. The で marks where (at the party), the contrastive choice from に which would mark mere existence.