The squelch function is activated in the absence of a sufficiently strong desired input signal, in order to exclude undesired lower-power input signals that may be present at or near the frequency of the desired signal. Contrast with noise suppression.
Source: from Federal Standard 1037C and from the NTIA Manual of Regulations and Procedures for Federal Radio Frequency Management in support of MIL-STD-188
Types
Two types of selective squelch are commonly used. Continuous tone coded squelch systems (CTCSS) use any one of about 50 toness from 67 to 254Hz. Digital coded squelch (DCS) systems use a continuous stream of digital data to identify themselves, running in the same audio frequency band as the tones but at about 131 baud.
CTCSS is usually called "PL tone" (for "Private Line", a trademark of Motorola), or simply "squelch tone". It can be regarded as a form of in-band signaling. See also radiotelephone.
Squelch can also be used based strictly on the signal strength of the signal, such as when a television mutes the audio or blanks the video on "empty" channels, or when a walkie talkie mutes the audio when no one is calling.
Uses
Basic squelch is always used in amateur radio to keep repeater stationss from being keyed-up constantly. Squelch tones are very often used as well since they keep other nearby repeaters on the same input frequency from keying the squelch-equipped one unnecessarily.
Many Family Radio Service (FRS) radios also use 38 different squelch tones, also erroneously called "sub-channels". While these do not add to the available number of conversations which can take place at once in a given area, they do reduce annoying interference experienced by users.