I made this (several months ago) in about 10 minutes (minus interruptions,) out of a new, unused bath towel. It does require a serger...so if you don't have one, I suggest searching craigslist, begging for one for your birthday, or borrowing a friend's.
I might be somewhat vague with this, because it really doesn't need much instruction. Basically, cut a square from the towel. I didn't use the "embossed" edge of the towel, and kind of lined up a hooded towel I already had, to get an idea for the size:
Using a bowl from the kitchen, I rounded all four edges.
Next, cut a triangle out of the terry towel...about the size that would fit over a baby's head...
Round the right angle of the triangle to match the square you already cut out, and serge the long bottom edge:
Pin the triangle into one of the corners of the square and serge around the entire edge. (See top picture for finished hooded towel.) It's really that easy!
Then, use it to wrap a baby shower gift! Or, go bathe the baby. :)