What is the emperor with no clothes allegory?

It was a story about an emperor that had clothes special made for him. One day the tailor ran out of ideas for new clothes, but the emperor was inneed of new clothes for a parade going through his kingdom. So trying to be cleaver, the tailor told the emperor that he had made clothes from magic invisible threads. The emperor was reluctant, but believed the tailor. So the emperor, believing the tailor, went to the parade nude.

I can't really remember all of the details, but that's the basic concept. I don't remember what the inner meaning is also.