The story
From the shape of the fabric before being folded into a diaper.
Etymology from Wiktionary, CC BY-SA 4.0.
Today it means: A makeshift cloth diaper folded from a large piece of (usually square or rectangular) absorbent fabric, such as terry (coarse cotton), which is held in place by a diaper pin or other fastener. Full definition →
From the shape of the fabric before being folded into a diaper.
Etymology from Wiktionary, CC BY-SA 4.0.