Towels are a very important part of everyday life in Japan. Especially in the summer.
Japanese bathrooms, in general, don't have anything to dry your hands with, so instead you carry your own hand towel (super environmental I might add). This is the hand towel's primary use in Japan, but as it gets hotter, there are more and more functions.
Hand towels have now mostly become sweat absorbers. It is so hot and so humid, that even doing mundane tasks like writing on the chalkboard breaks me into a dripping sweat. Sweat does not evaporate here, it will build on your skin until it slides off. Hand towels are used to dab the sweat, especially off the forehead, and the mustache area.
Larger towels are often tied around the head, or around the neck to absorb the sweat.
There are specialized towels just for the heat of summer which even include a space for an icepack. It looks funny to see people wearing scarves in the middle of summer. I let the reminder of winter help cool me down.