The BudK catalog, mostly containing knives and Zombie Apocalypse supplies, had a cheap "space blanket" for sale. A blanket is just a large towel, right? This is thin aluminized material that is folded and compressed into a very tiny package. Even without cutting down, you can fit it in your pocket, smaller than your wallet!
As indicated in the accepted answer, optimizing the Towel for some purpose compromises it for others. This is optimized for "keeping warm" as a thermal layer, and high de-optimized for drying off or being cushioning. Even so, it has unique uses not shared by my regular Towel: it can reflect light like a mirror! It's actually water and air tight, rather than porous. It might be useful in fashioning a still for drinking water, both for concentrating sunlight and for providing a surface for condensation and making a water-tight container and keeping the wind off the apparatus.
The accepted answer makes me realize that the real point is being very general. Just like duck tape and paracord, it has a variety of uses. In the Towel in particular this relies on mediocre properties, having some blend of A and B which are each accessible, as opposed to being much better at A while not having B.
I recall Microfiber cloth towels for sale, and one of the reviews explained how they are great for keeping on a sailboat because they are remarkably absorbant yet more compact when dry, so good for limited storage. So it is with the Towel: you want it easily stowed and thus light and compact.
So use materials not known at the time H2G2 was written, using microfiber napping to be both suber absorbant for water and able to handle hydrophobic (oily) materials as well.
Make the weave out of super strong monofilliment. Have it so if you cut off a strip it won't make the rest of the Towel unravel, but you can unweave the strip to yield a long strong cord (and a handfull of loose felt).
The loose felt could be used as fire kindling. The strips torn make good bandages, so make the fluff be antimicrobial as well.
But that's all 2010 technology. Just as we have stuff at Walmart that was impossible in 1985, what will the future — or advanced technology from aliens — bring?
Ever hear of Programmable Matter? Wil uses this in several of his SF novels, and has a real-world patent on the quantum well technology.
The Flick of a switch: A wall becomes a window becomes a hologram generator. Any chair becomes a hypercomputer, any rooftop a power or waste treatment plant.
Imagine being able to program matter itself—to change it, with the click of a cursor, from hard to soft, from paper to stone, from fluorescent to super-reflective to invisible.
Or a humble Towel. Now there is a mil-spec towel for you! It normally maintains the form of a primitive cloth towel, with random daily changes to its color and print pattern. If used for any purpose, its intelligence automatically modifies its form and properties to be better at that task, while stealthily trying to remain "just a towel" to outward appearances.
In more extreme needs, it can morph into any material desired.
Folded up into a compact form, it will be your 21st-century phone/PDA. Unfold for a big screen, window, sheet metal, or the softest silk. Wrap it around yourself and it becomes a full space suit with life support capble of adapting to any extreme environment.
3@ParanoidPanda What other resources do you have access to? – HDE 226868 – 2015-07-18T19:48:45.507
3@HDE226868: That is a very good question... Well... Lots of things, for instance soap, and banana skins, so I could easily trip my opponent up with my Towel... – None – 2015-07-18T19:51:02.190
"Don't forget to bring a towel!" – Chloe – 2015-07-23T22:49:01.927
2@Chloe - Towel* – michaelpri – 2015-07-24T05:40:46.610
9How is this world building? Funny sure but... – James – 2015-07-27T15:58:08.510
1
@James: Well, I never actually knew about this site until this question of mine was migrated here... So I assumed that this site accepts strange questions that other sites don't, and judging by the response to this question, I'm guessing that that is the case! :D
– None – 2015-07-27T16:01:04.7203We certainly do take strange questions, no arguments there, but within a certain scope and this just doesn't quite fit. (For the record the question is well written and funny, responses have also been entertaining). – James – 2015-07-27T16:07:34.120
1I'm thinking this would be a better fit for the sci-fi stackexchange... – Serban Tanasa – 2015-07-27T16:13:12.133
@SerbanTanasa: I thought so too, that's why I asked my first question there on boghogs... However because the answers would not be based on hard facts, they closed it as primarily opinion-based, and migrated it here... So if I had asked this question there, the same thing would have happened, so I thought it best to ask here... :D – None – 2015-07-27T16:38:27.093
6Some folks may be slightly confused as to why five close votes were cast nine days after the question was asked. It was the result of a discussion in chat that ended up covering half a dozen topics (some of which are still active). If anyone disagrees, chat and meta are good places to bring it up, as are simply votes to reopen. I still think it should be closed, though. – HDE 226868 – 2015-07-27T21:35:20.620
@HDE226868: Do you think that there is somewhere where this would be more on-topic? – None – 2015-07-28T15:00:54.483
@ParanoidPanda I don't know. – HDE 226868 – 2015-07-28T16:02:29.853
10I'd say that the fact that it is now the 3rd most highly voted question in the history of this site means that your visitors want to see more questions like this. If the rules don't allow it, expand your rules. Also, to a mite, a well used Towel is much better than an entire world. – krowe2 – 2015-07-28T18:54:42.153
2Concur'd. And after all, isn't the very heart of worldbuilding coming up with serious answers to ridiculous questions? I'm all for expanding the rules to allow stuff like this. – possiblySerious – 2016-01-13T20:06:10.723