We aren't so great about replacing or tossing our old kitchen towels, even when they've seen better days. They are just so useful, and if it's laundry day, there's a good chance we'll reach for one while doing dishes and find an empty cupboard (even though we counted more than a dozen last time we checked).
A few things we use our kitchen towels for, besides just drying dishes:
A drying rack, of sorts. We lay down a few towels and pile up dishes we've hand-washed.
Impromptu trivet for a heavy pot.
Apron. We don't really like aprons, but we hang a dishtowel from our waistband to frequently wipe our hands while we cook.
Decoration. The pretty ones hang from our oven door handle and add color to a bland kitchen.
Wrap for produce. If we're out of storage bags and are planning to use some greens or herbs quickly, we'll wash them and roll them up in a dishtowel, then store in the refrigerator.
Pot holder. If it's within reach, a towel usually serves when picking up the lid of a pot or pulling something out of the oven.
Any other suggestions?
Related: The IKEA Kitchen: TEKLA Towels (and Napkins)
(Image: Faith Durand)
TW Salt Mill by Wil...

I have collected mine over the years and I use one a day most days. When they get really gross they go into the "cleaning rag/dog paw wiping rag" bin and continue to live on and on!
We have more than 50 kitchen and bar towels. We bought a couple of bulk packages and used them to pack our dishes and glassware when we moved 5 years ago and they have seen an endless amount of use since. They even made good home burp clothes when our son was an infant.
I have a bunch of generic blah towels that we use under the dish rack and for various kitchen uses.
I'd really like to start collecting some awesome old ones. My mom used to have a wicked collection that she compiled on her travels through europe and the mediterranian. Unfortunately those towels have seen better days as she loved to used them every day.
One day I'll have some quality linen towels that do a good job and are nice to look at.
The IKEA towels you have in the photograph are my favorite workhorses in the house. At $0.49 a piece, I buy them with abandon and don't hesitate to use them on brutal messes. I have nicer dishtowels, but I baby them a bit because they are pretty or vintage or sentimental. I must have at least 25 of those IKEA towels in the linen closet and if they get stained or otherwise damaged, I don't care one bit.
I use them when I make Pumpkin Rolls (as well as log cakes and jelly rolls) for the holidays. You have to roll the sponge cake up while still hot so it forms the shape as it cools and rolling it in a clean towel prevents it from sticking to itself. Better than anything else since the fabric lets the warm steam escape!
For a non-kitchen related use: I also use them to cover big sewing projects when I'm not working on them (like my counted cross stitch frame). Keeps the cat hair away. Really old ones make excellent dust cloths.
My elderly mother lives with me and she buys kitchen towels almost compulsively. We have them for every season and holiday theme. When she goes onto her rewards, I will never have to buy a kitchen towel again. My inheritance will be a lifetime supply.
I use my towels for everything listed above, as well as for cleaning the kitchen. And as place mats. And as a fly swatter. And a billion other things.
I use my striped kitchen towels as backdrops for photographing food, and my kitchen Buddha gets to sit on a towel too, so he can be more comfortable. ;-)
I have dozens... problem is, is that I found a way to make my own... and I really don't need more. I had to start selling my new creations, because I really like making them and geeking out about the fabrics.
Check my shop: http://literati.etsy.com
I have hundreds. A life time supply and I still buy them.
I use them for cooking, baking- cake rolls as someone said before and prepping/drying veggies etc.
And I use them for the same reasons as most of you said but also most importantly I use them as dinner napkins. They are big and cover your lap or can be tucked in the neck of a shirt.
They wash well and the colors look great folded up in my laundry closet on the shelves.
If you buy a set of 4 they are somewhat color coordinated and look terrific placed on the dinner table.