The idiom "to work [something]" means to wear it and show it off as if you are an attractive model.
"Way to..." means "good job!" (But this can be used sarcastically also to mean that you are doing something wrong or stupid.)
"Way to work that diaper!" means "You are doing a good job wearing the diaper and making it look like fancy clothes a model would wear."
If someone just says "Work it!" they mean that they think someone is acting like a model or a diva. It can also mean that they see someone being confident and want to encourage that person to continue to be confident, or that they like what the other person is wearing and think it looks nice.
Imagine that two friends go to a clothing store. One of them picks up a jacket and tries it on. The other friend might say "Work that jacket!" or "Work it!" This means that either the person who is trying the jacket looks confident and proud wearing it, or that the person who said "Work it!" thinks it makes the other person look attractive.
Now imagine that it is 8:00 in the morning. A young woman (let's name her Liz) arrives at her friend's house (let's name the friend Paula). Liz knocks on Paula's door. After knocking some more, Paula finally comes to the door. It is clear that Paula was still sleeping. Paula's hair is a mess and she is wearing a bathrobe. Liz might look at her and say, "OK, girl, work it!" This would be intended to make Paula laugh, because it does not fit the situation. Liz is joking, as if Paula makes messy hair and a bathrobe look like a model in fancy clothes, which is probably not true. Liz hopes that Paula will laugh.