The Collaborative International Dictionary of English v.0.48:

Toweling \Tow"el*ing\, n.
   Cloth for towels, especially such as is woven in long pieces
   to be cut at will, as distinguished from that woven in towel
   lengths with borders, etc. [Written also towelling.]
   [1913 Webster]

WordNet (r) 3.0 (2006):

toweling
    n 1: any of various fabrics (linen or cotton) used to make
         towels [syn: toweling, towelling]