Terry cloth is a uncut-pile weave fabric. Pile fabrics (which also include velvet and corduroy) are made with an extra set of yarn looped through a ground weave or knit. If these loops are cut you get a fuzzy cut-pile fabric, but terry cloth is uncut and its loops result in added absorbency. You can see how it’s woven by hand in this video.
In the 1970s-80s, terry cloth got to escape the bathroom and enjoy several years in the form of fly rompers, sundresses, and jogging suits. You don’t see too many printed terry cloth fabric on the market anymore, though maybe Japan will change that.