Rods are fine and they are also the accepted norm. I have issue with them, however. I believe, in most realistic circumstances, they fail their purpose. They require people to neatly fold and then slide their towels between the wall and rod, being careful to avoid bunching.
I hypothesize that most people do not do this. My experience has been that, in general, the majority of the household performs some version of the above towel hanging procedure (on a good day), but only one member of the household actually follows through completely. This renders said member very frustrated with the picking up of the mildewing, casualties of a failed system, and the delinquent members weary of the inevitable lectures which follow.
Now, I do not claim to have the perfect solution to this epidemic, but I have found a slightly better way. Hooks. I know you were hoping for something a little more ingenious, but it's midnight and hooks are all I've got.
Hooks are easy to use, allow for adequate ventilation of the towel, and, because of the elimination of the folding, tend to look nice. The ease of use is HUGE. It produces a much higher probability that the towels will be hung. Everyone's life is easier.
But, I digress.
My original point was that my tiny bathroom came with rods but I prefer hooks. Since I'm renting, I don't want to remove the rods to install hooks, so I designed a solution...
I used fabric scraps and utility hooks to transform a rod into a useful fixture!
Now, on the days that my kids actually manage to get their towels to the bathroom, the towels might actually be hung as opposed to wadded in heaps, or flung over the shower door.
** You can check out more of my nest (and insanity) by clicking the page link 'Belmont Cottage' at the top of the blog**