The main reason I bring a camping towel on a backpacking trips is to wipe down the outside of a wet tent or shelter before packing it away for the day. It's a neat little trick to cut down on extra water weight and leaves you with a drier shelter when you set it up the following evening.
I rarely use one on myself and just dry myself off with my clothes using my body heat to dry them out. Body heat is really good for that.
I also don't bother with a commercial camping towel like ones from MSR or REI that cost $12 and up. Instead, I use a dish towel, like the ones you can buy at Trader Joe's or supermarkets for 2 or 3 bucks. These are made using a slightly thicker absorbent fabric than camping towels but perform exactly the same with almost no extra weight penalty. If you're a complete fanatic, you can probably cut one of these down to 1/4 if its size and use it like a sponge.
I've been think of doing that myself to save a few grams. Haha!
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