。
She was wearing a loose-fitting jacket.
Literal
[topic-は] [roomy-attributive-とした] upper-garment [object-を] was-wearing.
ゆったりとした is a participial form built from the mimetic ゆったり ('roomy, relaxed, unhurried') plus と plus the past form of する: 'in a state of being ゆったり.' This ~とした construction turns a state mimetic into an attributive modifier ('a [mimetic-state] X'). 上衣 ('upper garment') is a slightly literary word for a top, jacket, or outer wear; in casual speech 上着 would be more common. 身につける ('to wear, equip oneself with') is more elevated than 着る — covers any kind of donning, including abstract things like skills.