Green’s Dictionary of Slang

towel n.

[abbr. oaken towel n.]

[18C–mid-19C] a cudgel.

SE in slang uses

In compounds

towel-head (n.) (also teatowel-head, towlie) [SE towel + -head sfx (2)/SE head; the term became particularly popular during and after the Gulf War of 1991]

[1980s+] a derog. term for an Arab from the Middle East.

towel-tugger (n.)

[1990s+] (Aus.) a childish person, a weakling.

In phrases

throw in the towel (v.) [boxing use, whereby a towel or sponge thrown into the ring indicates the retirement of a fighter who is losing badly; note earlier at chuck up the sponge under sponge n.]

1. [20C+] (also chuck in…, sling in..., shoot in..., throw in the marble, ...the rag, throw the towel in, chuck…) to give in, to capitulate.

2. [1900s] (also throw the handkerchief) to resign.

3. [1910s–30s] (also throw in the sponge) to die.