Choose a cloth that is lightweight and which can be crumpled down into a very small form, preferably silk. Larger and heavier cloths are often too big when folded or rolled up to be concealed easily.
Roll up the cloth into the smallest form that you can get it into so that it won't be seen while you hold it in your hand.
Keep your sleeves tugged down low to provide you with extra cover from the eyes of the audience.
Palm the cloth in your hand if you want to actually have it in your hand and concealed from view. This allows you to keep the cloth ready to pull out of your hand, an ear or use it for whatever else you need to do with it quickly. Squeeze the rolled or folded cloth tightly between the palm-side edges of your thumb and forefinger or between your thumb and the palm of your hand. Don't expose the palm of your hand fully to the audience once the cloth is there, or they will see it.