A Woman’s `Awrah in Front of Women
Question

We have heard that the `Awrah of a woman in front of other women is from the navel to the knees. Is this correct? Especially since in banquet halls we see women who come – may Allah keep us safe and sound – wearing short or see-through clothes, or garments with cut-away designs which show her calves, or they wear light and filmy garments, or things that leave a part of the chest or back uncovered… So Muslim women come out and they look like dancers in the non-Muslim countries or improperly-dressed actresses on the screen. If we tell them not to do that, they say, There is nothing wrong with that; women’s `Awrah is from the navel to the knee. Modesty has disappeared and women are becoming argumentative and imitating the non-Muslims, and the problem has reached overwhelming proportions. Please advise us, may Allah reward you.
Praise be to Allah.`Awrah of women in front of men
All of a woman is `Awrah in front of non-Mahram men , and it is not permissible for her to appear before men even if she is covered, if there is the fear of fitnah (temptation) because of looking at her and seeing how tall she is and how she walks. 
A Woman’s `Awrah in Front of Women
Concerning what was said about a woman’s `Awrah in front of other women being from the navel to the knee, this applies only when she is in her house among her sisters and the women of her household. 
The basic principle is still that she should cover all of her body lest she be taken as an example and this evil practice become widespread among women. 
Similarly, she must also cover her charms in front of her Mahrams and strange women lest some of her Mahrams be tempted by her or lest some of the women describe her to others.
It was reported in the Hadith that the Prophet (peace and blessings of Allah be upon him) said: “No woman should describe another woman to her husband so that it is as if he can see her.” 
What this means is that if her charms, such as her chest, her shoulders, her stomach, her back, her arms, her neck and her calves, become visible, whoever sees that will inevitably have an impression of her, and usually women talk about what they have seen to their families, male and female alike. So a woman may mention that in front of non-Mahram men [i.e., men who are not Mahrams of the woman being described] in a manner that may provoke them to pursue her, or which may cause bad people to form an attachment to her.
For this reason, women have to cover their charms – such as their chests, backs, arms, calves, etc., - even in front of Mahrams and other women. 
Observing modesty in parties, schools, and hospitals
This covering becomes even more essential in parties, leisure facilities, hospitals and schools, even if there are only women present, because some non-Mahram men and adolescent boys may see them or take pictures of them naked which will be a cause of temptation to those who see them. 
A Warning to Women against making Wanton Displays
A stern warning has been issued to those who make a wanton display of themselves and wear see-through or tight clothing, when the Prophet (peace and blessings of Allah be upon him) said:
“There are two kinds of the people of Hell … women who are clothed yet naked, walking with an enticing gait with something on their heads looking like the humps of camels, leaning to one side. They will not enter Paradise or even smell its fragrance.” 
What this means is that they are wearing see-through or tight clothes which show the size of their frame, or there are openings cut in the fabric which show their chests, breasts and other charms. This is widespread in parties and in general gatherings.
For more details, please see these answers: 43289 , 26304 , 102187 , 310812 , 153367 .
And Allah knows best.