1. Derogatory term to refer to those of Middle-Eastern (or Indian, but I suspect only because most people would use "Towel Head" in everyday conversation couldn't tell the difference between the two to save their lives) origin, based on the religious custom of wearing a turban.
2. A missed oppurtunity to use the term "Dune Coon", which at least always makes me laugh.
Towel Head definition by Urban Dictionary
