A tow-headed person is one with very light hair. The term is derogatory and is usually used in reference to children.
Just like the term "ginger" refers to someone's hair color, in this case red hair, the term "tow head" is a term that describes someone with very light blond hair. In order to be tow-headed, the person to which one is referring has hair that is almost white.
The term "tow-head" stems from the word "tow" which refers to the fiber of hemp or flax, which are very light-colored materials, and has been around since the 19th century.