They're completely different sports.
They're both played in an indoor court, but a racquetball court is longer than a squash court (and I think a little thinner).
Racquetball balls are extremely bouncy, bouncing a long way after hitting the ground or a wall, whereas squash balls are much harder and require more force to stay in play. Squash balls also die quickly after bouncing, which makes balls harder to return.
Racquetball is an American sport and to my knowledge it isn't played outside the US. Squash is played all over the world.
Squash: https://www.youtube.com/watch?v=fdYZePDe69s
Raquetball: https://www.youtube.com/watch?v=JpLhjIzixx4
A while ago I was confused because a Chinese dictionary said 壁球 was both 'squash' and 'racquetball' in Chinese, so I asked this question here:
http://www.italki.com/question/222442
2014年12月19日
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Squash is the English name. Racket ball is America .