The Hitchhiker’s Guide to the Galaxy has a few things to say on the subject of towels.
A towel, it says, is about the most massively useful thing an interstellar hitch hiker can have. Partly it has great practical value — you can wrap it around you for warmth as you bound across the cold moons of Jaglan Beta; you can lie on it on the brilliant marble‐sanded beaches of Santraginus V, inhaling the heady sea vapours; you can sleep under it beneath the stars which shine so redly on the desert world of Kakrafoon; use it to sail a mini raft down the slow heavy river Moth; wet it for use in hand‐to‐hand‐combat; wrap it round your head to ward off noxious fumes or to avoid the gaze of the Ravenous Bugblatter Beast of Traal (a mindbogglingly stupid animal, it assumes that if you can't see it, it can't see you — daft as a bush, but very ravenous); you can wave your towel in emergencies as a distress signal, and of course dry yourself off with it if it still seems to be clean enough.
More importantly, a towel has immense psychological value. For some reason, if a strag (strag: nonhitchhiker) discovers that a hitchhiker has his towel with him, he will automatically assume that he is also in possession of a toothbrush, washcloth, soap, tin of biscuits, flask, compass, map, ball of string, gnat spray, wet-weather gear, space suit etc., etc. Furthermore, the strag will then happily lend the hitchhiker any of these or a dozen other items that the hitchhiker might have accidentally "lost.". What the strag will think is that any man that can hitch the length and breadth of the Galaxy, rough it, slum it, struggle against terrible odds, win through and still know where his towel is, is clearly a man to be reckoned with.
Hence a phrase that has passed into hitchhiking slang, as in "Hey, you sass that hoopy Ford Prefect? There's a frood who really knows where his towel is." (Sass: know, be aware of, meet, have sex with; hoopy: really together guy; frood: really amazingly together guy.)

The Caterpillar and Alice looked at each other for some time in silence: at last the Caterpillar took the hookah out of its mouth, and addressed her in a languid, sleepy voice.
'Who are YOU?' said the Caterpillar.
This was not an encouraging opening for a conversation. Alice replied, rather shyly, 'I--I hardly know, sir, just at present -- at least I know who I WAS when I got up this morning, but I think I must have been changed several times since then.'
'What do you mean by that?' said the Caterpillar sternly. 'Explain yourself!'
'I can't explain MYSELF, I'm afraid, sir,' said Alice, `because I'm not myself, you see.''I don't see,' said the Caterpillar.
'I'm afraid I can't put it more clearly,' Alice replied very politely, 'for I can't understand it myself to begin with; and being so many different sizes in a day is very confusing.'
'It isn't,' said the Caterpillar.
'Well, perhaps you haven't found it so yet,' said Alice; 'but when you have to turn into a chrysalis--you will some day, you know--and then after that into a butterfly, I should think you'll feel it a little queer, won't you?'
'Not a bit,' said the Caterpillar.'
'Well, perhaps your feelings may be different,' said Alice; 'all I know is, it would feel very queer to ME.'
'You!' said the Caterpillar contemptuously. 'Who are YOU?'
Which brought them back again to the beginning of the conversation. Alice felt a little irritated at the Caterpillar's making such VERY short remarks, and she drew herself up and said, very gravely, 'I think, you ought to tell me who YOU are, first.'
'Why?' said the Caterpillar.
Here was another puzzling question; andas Alice could not think of any good reason, and as the Caterpillar seemed to be in a VERY unpleasant state of mind, she turned away.
'Come back!' the Caterpillar called after her. 'I've something important to say!'
This sounded promising, certainly: Alice turned and came back again.
'Keep your temper,' said the Caterpillar.
'Is that all?' said Alice, swallowing down her anger as well as she could.
'No,' said the Caterpillar.
Alice thought she might as well wait, as she had nothing else to do, and perhaps after all it might tell her something worth hearing. For some minutes it puffed away without speaking, but at last it unfolded its arms, took the hookah out of its mouth again, and said, 'So you think you're changed, do you?'
'I'm afraid I am, sir,' said Alice; 'I can't remember things as I used--and I don't keep the same size for ten minutes together!'
'Can't remember WHAT things?' said the Caterpillar.
'Well, I've tried to say "HOW DOTH THE LITTLE BUSY BEE," but it all came different!'