Unlike his son, Vito wasn't interested in flashing his money by spending lavishly. His "mall" in Long Beach was intended to provide him with security, not to parade his wealth. His humble appearance and modest lifestyle were part of his strategy to make his enemies underestimate him, and probably to keep the IRS off his back.
To be fair to Michael: his lavish lifestyle, showy estate and giant party for Anthony were part of his strategy to pretend to be a wealthy "legitimate" businessman. The flashy stuff fit right in with the Nevada gaming culture.
I don't even think it was as thought out as all that. I think dressing simply and not being flashy came naturally to Vito. He was, at heart, a poor kid from a small Sicilian town who just happened to make it big. I don't think his humble appearance was a strategy; more likely it was closer to who he really was as a person, more what he felt comfortable with, what felt natural to him.
