Contrary to popular belief this is not a derogatory term but an object used by prostitutes. It is used to inefficiently and unhygieneically clean their vaginas between sex with different customers. It is generally a dirty looking towel or some newspaper that you wouldnt wanna touch with a barge pole (this is a very very very long pole)
'Ah crap I got it running out and down my legs'
'Here use my slutrag'