Just wash them in the machine using liquid detergent and no fabric softener or bleach. Some towels can be washed in hot water, others may require warm depending on the manufacturer's instructions. Air dry or dryer are both OK.
Are you asking about microfiber towels, or just towels in general? Here at Autopia most people assume "towels" simply means "MF towels".
I recommend at least a dozen terry MF towels for general paintwork which would include buffing and quick detailing mainly. Then a couple more dedicated towels for ONLY cleaning glass (although you may have your own favoured glass wiping material).
Leather chamois for drying aren't really liked well here for various reasons. They've been eclipsed mainly by waffleweave MF towels or synthetic PVA stuff like the Absorber (if you can't obtain waffleweaves readily).
Waxing is mostly done with applicator pads of one type or another but some people do use a swatch of MF towel for waxing.
If you do use regular cotton towels be sure to get quality ones, as the cheap bulk ones are scratchy garbage. I suggest using the search engine to read more about how many towels people are using and some guidelines for buying good cotton towels. Particularly in the Archives.
And don't forget about the awesome Autopia Concours Buffing Towels. That's now all I use for delicate work and QDing. Problems I used to have with QD streaking when buffed with regular MFs are gone when I use the CBT. BTW, I think DFTowel has an equivalent product; I just haven't had a chance to try it yet.