There are a couple of threads up just now asking about this kind of simulation so I thought I would post a couple of video examples of this to show the differences in film and game simulations.
This first is a short I did some time ago for a music video,this shows cloth collision,where the cloth robe is simulated by colliding with the model itself,this kind of simulation requires a high poly count making it useless for game models.
Note the animation within animation on the pirate flag and hat with the laughing skull.
http://www.youtube.com/watch?v=C7WpcYHdcqg
This second is a character in FPSC, is a single mesh and uses additional bones to achieve the cloth simulation.
Note the secondary movement of the apron and the butt cheeks.
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http://www.youtube.com/watch?v=kbCKpxiIGac