If you have a tiny bathroom with no storage room for towels, consider buying a cheap nesting basket set from a discount store and mounting the baskets to your wall. They're a surprisingly attractive way to keep bathroom linen handy.
Crafting blog I'm Busy Procrastinating had just such a situation recently and attached three inexpensive baskets to the bathroom wall above the toilet. Since the three baskets were designed to nest within each other, it was only natural for washcloths to go in the smallest basket, hand towels into the medium-sized basket, and full bath towels into the largest basket.
Design solution: Wall baskets for bath linen storage [I'm Busy Procrastinating]