A situation in which a highly shorted stock suffers a price increase, sometimes related to good news, but often without an apparent cause.  Short sellers buy to cover their short positions, creating more buying pressure.  At a certain point, the stock will trade at a price higher that shorts’ entry-range, and shorts start incurring into paper losses.  As the stock rallies, momentum players join the buying side, longs "sense" they can wait and sell at higher prices, true sellers disappear, short shares for more shorting are often unavailable and even market makers can help by gapping prices up in consecutive sessions.  Short sellers are often trapped by emotions, and as prices soar, concerns turn into fear, and fear turns into panic.  Panic ultimately leads to hopeless covering ("chasing the ask", covering at market at higher prices and with added slippage) with great losses.  A short squeeze is like a train without brakes!   

After the initial buying frenzy is over, more often than not new short sellers join the game, speculating that the uptrend is exhausted.  Decreased momentum, price divergences, volume, and other confusing indicators are frequently used to "guess the top". This dangerous behavior restores the short interest, leading to new cycles that create a protracted, chronic short squeeze.