I did towel benching in high school years back. We used one thick towel rolled up, placed in the middle of the chest, ends pointing head to feet. The idea was to come down and touch it then go back up. I think the idea is that when you become comfortable doing that, you try benching without the towel and go all the way down.
If you are going to try it in your workout, do sets like you normally would without the towel. At least that's what I have always been told. It is easier to lift out from that position than from directly touching the chest which allows you to lift maybe slightly more weight. I didn't really watch for specific results when I was benching that way, and I didn't notice a whole lot of difference between it and normal benching except the stress on the shoulders.