Squatting is infringing other people's trademarks. If I bought micros0ft.com and covered it in software ads, that would be squatting.

If I bought hotels.com and planned to sell it for money to a big hotel chain or something, I've not infringed anyone's rights. Generic/descriptive names are normally OK.

of course if there is a company using the generic for a non-generic purpose and I grab a typo/another extension and use their non-descriptive purpose, that is also squatting. For example, if I owned amazon.net and tried to sell books that would infringe on amazon. Or if I bought apple.net and sold computers. However, if I advertised amazon rain forest trips or sold apples that would be ok (not squatting).

Of course, lots of money and lawyers can change what is and isn't right (checkout nissan.com)