Reading them would be Cold Reading (She is wearing a extremely short dress, so she is probably on the naughty side), while understanding is actually talking to them and figuring out why they are like that(She wear extremely short dress because she is insecure and wants the attention...OR NOT, maybe she just found it cute).

Cold reading is based on lucky guessing while understand you actually talk to the person and understand why they are/do what they are/do. Understanding, usually, creates a connection with the other person while Cold reading only creates the curiosity(or makes you look pathetic). Stop assuming things and start connecting with people. Your relationships will be much better.