Earlier than you might think, Carolyn. Terry towelling, or more properly, Turkish towelling was brought to the UK by a Lancashire company called Christie's in 1850! They worked out how to make it and patented the looms to do so, supplied Queen Victoria and the rest, as the saying goes, is history. They are still massive suppliers of Turkish towelling, and are the official supplier to Wimbledon of those tennis towels. There's a nice potted history of the company and its Turkish towels on Wikipedia here:
https://en.wikipedia.org/wiki/Christy_%28towel_manufacturer%29 and on the company's own heritage page here:
http://www.christy-towels.com/our-heritageChristy's still call the fabric Turkish towelling though, so it doesn't answer your question about why it has that terry towelling name... as I understand it terry cloth was made from other materials, not just cotton that towels are made from. Terry is a type of fabric made with loops on one (or both) sides of the fabric and can be made from wool, silk, etc... the terry being the loop formed by the pile of a fabric when left uncut. There is a handy summary of the different types of terry cloth on eBay here:
http://www.ebay.co.uk/gds/What-is-Terry-Cloth-/10000000178758813/g.htmlThere is an amazing number of different fabric types - as I know from my family history, as many of my folks were in the Lancashire cotton trades, and the census often mentions what type of fabric they worked on - I found a handy list of fabric types so am adding it here for reference and will pop it into a new post as a sticky at the top of the Textiles forum.
https://en.wikipedia.org/wiki/List_of_fabric_names