I made a couple of these using a project from this book.
http://www.amazon.com/Quick-Easy-Sewing ... 0865732884Basically, you cut a hole for the head in one large towel, make the hood from another and attach it to the head opening. This book has directions for making a puppy face, but really, you could adapt it to make another animal by changing the features slightly. They are really very easy...the hardest part is placement of the applique pieces.
This one is similar to the one in the book, but without the animal features.
http://clothing-design.suite101.com/art ... oded_towelThis one has animal features, but has the hood attached to the side of the larger towel.
http://www.nickjr.com/crafts/tasha-hooded-towel.jhtmlI prefer the poncho style, with head opening cut into the middle of the towel.
Hope this helps.