The polo shirt occupies a position almost no other garment holds, acceptable in settings that would reject a t-shirt and in settings that would find a dress shirt excessive. That position was designed rather than discovered.
It was built to solve a sporting problem
Early tennis and polo were played in woven long-sleeved shirts, which restricted the shoulder and held heat.
A knitted fabric solved both, stretching with movement and allowing air through, while a soft collar could be turned up against sun on the neck.
The short placket with a few buttons allowed ventilation to be adjusted without the garment coming apart, which a full button front does not do as neatly.
The collar carries the formality
A collar is the detail that separates a shirt from an undergarment in the conventional reading of clothing, and the polo retains one.
Because that collar is knitted rather than interlined, it is soft and does not require the structure and pressing a dress shirt collar depends on.
This gives the garment a formal signal at a casual level of effort, which is precisely the gap it occupies in a wardrobe.
Knit construction changes how it fits
Piqué, the textured knit used most commonly, has a raised structure that adds body and helps the fabric hold its shape.
Knits stretch, so a polo tolerates variation in fit that a woven shirt does not, and it moves with the wearer rather than resisting.
The same stretch is why polos lose shape at the collar and hem when washed and dried carelessly, since the structure has no woven grid to return to.
The garment is easy to brand
A small chest logo sits naturally on a polo, and the format became strongly established across the category.
That made it the default garment for corporate wear, club kit and uniforms, which pushed enormous volume through the category.
Volume of that kind also devalued it in some contexts, which is why the same shape reads as uniform in one setting and as considered dressing in another.
Quality shows in a small number of places
Collar construction is the clearest indicator, since a collar knitted separately and attached holds its shape far better than one cut from the same fabric as the body.
Yarn quality determines whether the surface pills after a season, and heavier long-staple cotton resists it considerably better.
Placket construction and the way the shoulder seam is set complete the picture, and together they explain most of the price range within a garment that looks identical on a hanger.