There is something to be said for finishing a project. I think the dishclothes are perfect for that. I must say that I haven't ever knit one. Isn't it a good feeling to finish a project and without all those seams to sew and ends to weave in?
My mother, your Nana, not only knit them but also crocheted dishclothes. I am sure it must have been the same reason, just to have a project finished in a short time. She also did some pot holders - I think crocheted - but I still have a couple that she made. I haven't used them very much so they are ratty from use. They should last many more years that way.