Costume can be equipped on your costume equipment section, in Alt + Q.
There are top, mid and low costume hats, that when equipped, will replace the looks of your regular hats.
You can even enchant your costume hats with special enchant stones, some special event related costume hats even has temporary bonus.
Aladdin's Event Shop
You can obtain the following listed costume hats from Aladdin's Event Shop in Prontera.
Limitless Island Costumes
Siege Coin Costumes
Use 100x Gelstars to obtain a random costume from the list.
The list updates everyday with different costumes.