In the summer time, you may refresh and clean your hands before eating in a restaurant. In the winter, it warms you up.
It can come in actual towel as top quality and you would usually receive one upon arrival and another one with your tea at the end of the meal.
The second category is a “outsourced version” that comes wrapped in a opaque white paper, these are produced by a company who delivers them, collects the used ones and washes them to make them ready for use, these imply a monthly subscription by the restaurants.
The “economy class” are the lingettes for bars, izakayas, konbini, etc, less funky and glamourous but also useful!
I have learnt to make them at home in the microwave by adding a little water and heat them. Only thing is I never knew where to buy a stock of oshibori, which shop, which section, any tip?