tow headed is literally "flaxen haired". This meaning of tow comes from Middle Low German touw (which means "flax, hemp fiber"). This probably went back to the prehistoric Germanic base *tow-, *taw "make, prepare" (source also of English tool), in the sense "make yarn from wool; spin".

A person with very light (almost white) blond hair, "tow" being flax or hemp fibers. Tow-headed, along with fair(-haired) and flaxen-haired, is a tradional way in the English language to refer to blond hair or lightly-colored hair, having come from its old Germanic roots (which are quite rare).