In thinking of the little black dress, one normally thinks of Coco Chanel, the woman credited with inventing almost every aspect of modern chic. It makes perfect sense that the little black dress would be a product of Chanel's flapper era. Besides being black, the little black dress' defining characteristic is being sexy without being revealing, something flapper style perfected.
The little black dress is generally a variation on a sleeveless shift. It is never overly tight, though it may have a fitted bust. It skims the figure rather than clinging to it. As hemlines change, the hem of the little black dress rises or falls with the times, but it always hovers around knee length.
However, the demure cut of the body of the dress doesn't imply that it has to be conservative. When the little black dress reveals skin, it does so at the neck, back, and shoulders. While it typically leaves the arms bare, it does not reveal anything as obvious as massive cleavage or the full length of the wearer's legs.
The little black dress has been elevated to legendary status due to its versatility. It's always appropriate, which is really just a side effect of it being consummate chic. Because it's now a class of garment in its own right, it has even more power to transcend conventional dress codes than it did to begin with. The woman wearing it may be slightly overdressed, but she looks sophisticated, not prudish. Or she might be underdressed, but on her it looks hip. The little black dress is the dress that looks good no matter what.