Euphemism for having sex. The expression came about because the sound made while nailing a towel rack sounds a lot like the sound of a headboard banging against the wall during sex. Also, see "nail."
Yeah, he wasn't the best husband in the world, but he sure could nail a towel rack.
To hang a towel from ones erect penis while waiting for the person in the shower to reach for a towel, but results in the person reaching out getting a dick and a towel, and usually results in sex at the end of this dick grabbing experience.
after jane was done showering she reached out for a towel but instead got a towel and johns dick. Jane just got ikea towel racked, and john got laid.