No, it's not a costume. Character generation shows the player dressed in a motif from the starting zone (which depends on what chapters you own) and if there are levels of that style, shows the highest level. Class and race may bias the selection of example gear chosen. It's only one of the hundred or more styles you could use at champion level (50) and you would actually be able to wear gear with that appearance at any level, once the account has unlocked the style, as an outfit.

The term "champion gear" just means that at champion level, you have no constraints on your choice of gear, while lower levels characters can only wear the levels they've earned.

Outfits separate appearance from stats, allowing a character to have the appearance of a low-level armour while actually wearing higher-level gear, or vice versa. The style shown can be different from the style worn, too. Weapons also can be "disguised" by the outfit system, except for the one/two handed distinction. A sword can look like a dagger, for example.