The squelch feature of a two-way radio keeps the speaker quiet when no signal is present. The squelch setting adjusts the threshold at which signals will open (un-mute) the audio channel. It acts to suppress the audio output of the receiver in the absence of a sufficiently strong desired input signal.
With the squelch level correctly set, you will hear sound only when actually receiving a signal. Backing off the control will turn on the audio, and the operator will hear white noise (also called squelch noise) if there is no signal present.
Two-way radios usually have several levels for squelch adjustment. You want to select a level at which the background noise is just eliminated when no signal is present. The larger the level number you select, the stronger the signal you need to receive, and the lower the receiving range.