A panty party is an anonymous gift exchange where participants buy each other sets of underwear. These parties often take the form of a bachelorette party or a bridal shower.
The term panty party can be used to describe several types of parties but most commonly indicates an event where female guests are given a fixed price limit and the underwear sizes of another guest. Someone participating in such a party will bring a set of underwear as a "secret santa" type gift for the person whose measurements they received.
A panty party can also be a party where guests are expected to attend in their underwear. When invited to a panty party, it is advised to make sure which of the above the host means by the term.