I am a knitter. I use several methods for washing handknits and purchased sweaters, but I think the most gentle technique (recommended by Elizabeth Zimmerman, one of the grand old expert knitters) is NOT the towel technique. If I want to avoid all agitation and rubbing--which as TylerAnne says, can cause felting and shrinkage--I use a handwash soap like Eucalan. This does not even need to be rinsed: you just soak the item in lukewarm water + a capful of the soap for five minutes or so. I do usually put the item through one very gentle rinse, however, draining out the original water and soap, very gently squeezing the item, and swishing it slightly around in a fresh basin of water before draining.
Then I very gently squeeze out some rinse water, dump the whole soaking mess into a towel, and DO NOT squeeze the towel--just use the towel to transfer the sweater into my washing machine (dry the towel separately), and remove the water by setting the washer on spin and supervising it while the sweater spins for a very short time (30 seconds to 90 seconds, say). Check it frequently. When it feels pretty dry, take it out and dry flat. If you like, you can transfer it onto a padded hanger for final drying when it is nearly dry (just damp around the seams).
The idea here (particularly important for woolens) is to remove the water as quickly as possible, with minimal rubbing and handling, so that the sweater does not felt, shrink, or become stiff or mildewy.
And Maya, yes. A lot of people still handwash--especially knitters.