。
She wiped her face with a towel.
Literal
She [topic-は] towel [with-で] face [object-を] wiped.
で marks the towel as the means or instrument of wiping — the same particle that gives ペンで書く ('write with a pen') and 箸で食べる ('eat with chopsticks'). 拭く ('wipe') is the standard verb for clearing surfaces with a cloth: 顔を拭く ('wipe one's face'), 床を拭く ('wipe the floor'), テーブルを拭く ('wipe the table'). Note the kanji 拭 isn't part of the standard 常用漢字 list, so kana ふく is also common in casual writing. A short, vivid action sentence — the kind of clean grammatical example that everyday verbs lend themselves to.