Squads in PlanetSide are groups of up to 10 players working as a unit toward a common goal such as capturing a facility, defending a facility, or perhaps just doing general harassment to the enemy. Some of the benefits of being in a Squad are that not only do you have more firepower on your side and better communication but most importantly you have teammates who are specialized in their abilities and are thus able to perform critical tasks far more efficiently than a jack-of-all-trades player would.
Additionally when a member of a Squad earns experience, other members nearby also earn the same amount. A 20% bonus is also added to each share of the experience by being part of a Squad.
Squads are formed by opening up the chat bar and hitting Enter (default) then typing, /invite NAME, then hitting Enter once again. This will send an invitation to the player to join your squad if they aren't part of one already.
Another method of inviting people into your squad is by approaching and targeting the player and then hitting your Action Key (G by default). Then follow the on screen prompt to send an invitation to them.
Players can accept an invitation to join a squad by using the mouse and clicking on the pop-up window or by typing /yes.
Note that when you join or create a squad, you will see the members of it listed at the top. This list will show you the number assigned to the Squad Member in addition to their Health. The numbers assigned to the squad members will also be the same numbers seen on your Proximity map and your map screen. These are extremely useful for finding out where members of your squad are.