Certain commonly used verbs - hold, drop, wear, remove, etc. - can only be used on objects you are carrying or wearing. However, if you're in a room where a similarly named item you're trying to interact with is on the floor (like, say, a closet), the game still picks from items on the floor when you use these verbs. If you're in your closet and want to 'wear pants', the game will tell you 'I don't know which 'pants' you mean', even though you're only carrying one pair of pants.
It would make things a lot more convenient if certain verbs only picked from items you have on your person! I'm not sure if there's an easy way to do it, but if there is, it would definitely make interacting with the game a lot easier.