Found this out the hard way and thought I'd pass it along to anyone trying to learn how to use the shrinkwrap option.
It took me about an hour to realize that her arm is also part of the "Body" object that I was assigning as the shrinkwrap modifier Target. Tried manipulating the controls on the modifier to make the mesh shrink away from the arm and nothing worked.
Finally rotated the arm away from the hip so that the hip was closer to the skirt mesh than was the arm.
Not sure how this will work out down the road, but for now, it lets me continue the tutorial.
