My gauge is 5 sts per 1 inch with size 7 needles and my resulting cloth is exactly 8" x 12". Your mileage may vary!
Begin by casting on 39 stitches. With Color A, knit for 2 rows. (I started off using the natural as my first color.) Now, onto the stitch pattern:
**Always slip stitches as if to purl, with the yarn in back.
Garter Stitch Clovers (multiple of 4 sts + 3)
Row 1 (Color B) K 3, *Sl 1, K 3* until end.
Row 2 Knit across.
Row 3 (Color A) K 1, *Sl 1, K 3* until last 2 stitches, then Sl 1, K1.
Row 4 Knit across.
Just repeat these 4 rows until it's almost as long as you want it to be, ending with Color A. In my case, it was around 11.5 inches from the needles. Finish the cloth by knitting 3 rows with Color B and then bind off as usual.
EDIT:: Just to clarify things a bit here- The pattern as written will give you a different colored stripe at each end. I wanted a little bit of funk and asymmetry in the original dishcloth but this may not be to your taste. If this is the case, just knit your final pattern rep with color B (or, end with row 2 of the stitch pattern) and then knit the final border rows with color A. This will give you a more traditionally lovely cloth. :)
(I should stick to natural light for my pictures, heh.)
Voila! You now have an awesomely stylish new addition to your kitchen! I'm sure your dishes will enjoy it quite muchly. :D