This is a hand towel, usually used in guest bathrooms.
It's clearly based on Sonic Adventure 1, as it uses the odd-walking stock Sonic from that time, as well as the logo and specific swirl background. The towel itself is made of soft cloth and measures 12 x 14 inches. (see texture in corner inset, it's white on the back & terry cloth looking.

It was available at AnimeMate.com in the early 2000s. The color scheme is a bit strange, with non-matching blue, yellowish green, off-white and mustard/brown being used. It's nearly guarenteed to not go with any bathroom decor you might have. It should be noted also that the copyright is written right at the top, and the sides have 'ribbons' of a tougher thick material.