Kelim, Chapter Twenty-Eight, Mishnah Two
1) [A piece of cloth] less than three [handbreadths] square that was adapted for the purpose of stopping up a hole in a bath house, of emptying a cooking-pot or of wiping with it the mill stones, whether it was or was not kept in readiness for any such use, is susceptible to uncleanness, the words of Rabbi Eliezer.
2) Rabbi Joshua says: whether it was or was not kept in readiness it is pure.
3) Rabbi Akiba ruled: if it was kept in readiness it is susceptible, and if it was not kept in readiness it is pure.
Section one: According to Rabbi Eliezer, any time a worn-out piece of cloth that was too small to be impure was adapted for a specific use it goes back to being susceptible to impurity. The cloth might be used to stop up a hole in the floor of a bath-house. It might be used to hold a hot pot so that one could pour out its contents. Or it might be used to wipe up millstones. Rabbi Eliezer says that the cloth is impure whether or not it was previously designated for such usage. In other words, as long as it is being used, it is susceptible.
Section two: Rabbi Joshua completely disagrees and holds that since the cloth is less than three handbreadths and it is worn out, it is no longer susceptible.
Section three: Rabbi Akiva mediates between these two warring sages. If it was designated for such usage, then it was intentionally not thrown away (see 27:12). In this case it is still susceptible to impurity. However, if it was not designated for such usage, then even using it in such a manner does not change the fact that the cloth was discarded. In such a case, it is not susceptible to impurity.