Get the smooth Microfibre rather than the more towel like loop microfibre. They pack down much smaller.

On the other hand, you can get a larger smooth towel that takes up the same space as a small loop towel. This lets you get to the bathroom quickly, but with modesty when staying in campgrounds/hostels with shared facilities. (If you have ever stayed at a busy hostel, the best way to get a shower is to rush it, as soon as you hear the latch open!)

I now have several microfibre towels in various sizes depending on the type of travel I am doing. The smallest does double duty in my commuter bag.