An important part of the MassFX toolset is mCloth. Basically, mCloth is a version of the Cloth modifier that can participate fully in MassFX simulations. It can collide with other objects in the simulation, affecting their motion, and it can be affected by other objects' motion as well.
mCloth objects can be affected by Force space warps such as Wind and Path Follow, and can tear as a result of stress. For details, see mCloth Modifier.
To see an example of what you can do with mCloth, play this video: