Pots full of water or load, exert force on head. The base of the load resting on the head may be flat or rounded. When the area of the base is more, the pressure exerted by the load will be less, because
P = Pressure
A = Area.
When a thick piece of cloth is kept between the load and the head, the area on which the force is applied increases, hence pressure reduces. So, it does not hurt .
Also it acts like a cushion for absorbing shocks ( due to the jerks while walking), along with providing a support for the load for ease in balancing.