REI camping towel is awesome.
the take up hold but not absorb the water does let you ring it out and use again.. generic you can find them cheaper that the 'PackTowl'(tm)
I have something similar that I bought years ago; some European brand. If you need to wipe off, it does work but doesn't absorb a lot quickly. It feels like a leather chamois.
In any case, it does fold up very compactly.
I got mine like 5 for 1 on some closeout sale. Plus you can cut them into smaller ones too.
These are, in fact, very handy. I have a large one in my panniers for days when I have to change before work, and a teeny little one at my desk for days when I ride in my office clothes and just need to pat my noggin dry.