The red box in the photo is pointing at what the textile industry calls the dobby border, cam border, or towel band. It's not decoration. It's not a place to monogram your initials (though hotels do that). It's three jobs in one strip of fabric.
1. It stops your towel from falling apart
A bath towel is a loop pile fabric — thousands of tiny cotton loops standing up to absorb water. Those loops are fragile.
If you wove a towel edge-to-edge in loops, the first time it went through a commercial dryer the loops would snag, pull, and the whole towel would fray like a sweater.
The flat woven band has no loops. It's a tight, plain weave that acts like a belt. It:
locks the pile in place
gives the towel structural stability
prevents "edge curling" after washing
Manufacturers call this the "strength bar." Without it, a hotel towel would last about 20 washes. With it, it lasts 150-200.
2. It tells you where to fold (and where to hang)
Before machines, laundry workers needed a visual cue. The dobby border is always woven 2-4 inches from each end, creating a natural fold line.
In hotels, housekeeping is trained to fold at the border so stacks are uniform. At home, it's why your towel naturally wants to fold in thirds — you're following the engineering.