"Bis auf das letzte Hemd"
I think "das letzte Hemd" is equivelent (though not literally) to "the shirt on/off my/his/her back" in English, as in "I would give him the shirt off my back" or "they cheated him out of everything, down to the shirt on his back".
Presumably the "shirt on my back" is equivalent to "the last shirt", because if I'm giving away shirts (or being robbed of them), the one on my back will probably be the last one I part with :-).
So, "bis auf" when they're together mean "except for", and one of the translations is "except for the last shirt", so that one makes sense. I think "down to the shirt on his back" means the subject doesn't have any more [clean] shirts except the one he's wearing. I have no idea how you get that english sentence from the german phrase though.