From the wiki (http://wiki.squirrel-lang.org/default.aspx/SquirrelWiki/Lua%...) it looks like most of the reasons Squirrel was created stemmed from problems that have since been fixed in Lua.

The remaining differences seem pretty minor; IMO having the OO system baked into the language instead of implemented in user-space is a step backwards. The 0-indexing might be nice if you do a lot of FFI with C, I suppose. Hardly worth giving up the insane performance of LuaJIT for though.