If the developer will never be customer-facing, who cares? But if there will be customer interaction, the important question is "Will our customers trust a software developer in shorts?".

If the company is on the downward spiral or is not a tech company, then I think everyone expects control tactics such as dress code to be attempted to drive out the techies. If the company is a new up and coming tech company on the upward climb to greatness then who cares what employees wear. On the technical side, success occurs usually in spite of people that care about dress code, so taking time and expense to impress people is the opposite of what should be done.

I wore flip-flops and skate gear in my role in IT for many years. Some of the most brilliant developers I know wore pajamas (because they slept over at work many nights) and Batman t-shirts with cargo shorts to meetings. I fully support creative minds having the freedom to be comfortable. My own company changed their policy a while back and we went from jeans and Linux Ts to Dockers and ties. It shouldn't matter, but I know my creativity dropped after that :)

Not sure how Sutherland Global Services' Activision Department, the original one in Rochester Tech Park- not Canada, is doing- but around AT&T and other customer service providers we were the only ones who were able to wear anything. It ran as a startup when it first launched. It made us look less professional and things were more informal, but people were themselves and got the job done. Not sure if this relates but you get the idea.

Dress code for non customer-facing employees should be relaxed. I seldom need to be on site at a client's office, but when I am, I dress just as their employees do - anything from a suit to business casual. Otherwise, I wear shorts and flip flops in the office, as do most of my coworkers.

Cal Henderson, the guy who made Flickr, doesn't seem to own a pair of long pants. Also when I met Paul Graham, he was in shorts. So, yeah, I'd trust a software developer in shorts.

Depends on the company. Where I work you'd stick out like a sore thumb if you came in wearing anything but t-shirts and jeans (or shorts).