Owlet wrapped in cloth (5)

I believe the answer is:

towel

I'm a little stuck... Click here to teach me more about this clue!

'cloth' is the definition.
(towel is a kind of cloth)

'owlet wrapped' is the wordplay.
'owlet' anagrams to 'TOWEL'.
But, I'm not clear how this is indicated.

'in' is the link.

Can you help me to learn more?

(Other definitions for towel that I've seen before include "Owlet (anag)" , "Bathroom item" , "Dryer" , "Bathroom cloth" , "Drier" .)

I've seen this clue in The Mirror.

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