There's nothing wrong with asking someone this way; in most cases, it's the easiest way to ask. It is familiar and the other person will instantly know what you're talking about. Not to mention it saves you a lot of time and nerves.
However, there are more ways to open the conversation about a relationship. For example, it might be better to ask "what are we doing" instead of "what are we". Sometimes the way you ask can determine the conversation you are going to have plus the answers and clarity you will get.
Moreover, this common phrase can make some people shy away from inquiring about the relationship and resign themselves to going with the flow.
How to approach the conversation
Have an open mind
Remember that no matter how invested or non-invested you are, the other person may have a different experience.
Be ready and willing to communicate
The goal of the conversation is to establish what the relationship is not to hurt your feelings or expectations. Even if you don't get what you hope for, make sure you get clarity.
Don't blame yourself for "ruining things"
Most of the time after you pop the question things may not be the same. But the fact is that you needed to know and the only way to get that was to ask. If it doesn't go the way you hoped or things turn sour, that is not the point. The important part is that you got your clarity.
Here are some ideas to open the conversation
- Where do I stand in your life?
- Are you seeing other people?
- Do you want to continue to see other people?
- Are you sleeping with other people?
- Do you want to put a label on this?
- What are your intentions for what we are doing?
- What label(s) do you want to put on this?
- Where do you see this going? If anywhere?
- Is this enough for you?
- Do you want to make this official?
- What does it mean for you to make things "official?"
On the other hand, you should be able and ready to answer the questions you ask. Don't leave the responsibility of defining the relationship to the other person.
Conclusion
Cliches are good because they go straight to the matter and there's little room for confusion. But they are also cliche and for that reason can have drawbacks. If all fails definitely break out the "what are we", or start with it and use the ideas above to guide you in the conversation.