In the fictional universe of Warhammer 40,000, the Squats are a dwarf-like race descended from the humans that colonised high gravity worlds. Separated from the rest of humanity over the millennia they evolved their own distinct morphology and culture. Squats were discontinued from the game in the 90s by Games Workshop though their existence remains somewhat canon - they were reintroduced as a major power by a Tyranid invasion of their Home Worlds they then proceeded to join the Imperium.
The Squats were the equivalents of Dwarfs for the Warhammer 40,000 universe much in the same way as the Eldar served as Elves back during the genesis of Warhammer 40,000, before 40,000 had transitioned into its own story set in science fiction in space rather than fantasy in space.
Squats evolved from the human miners and explorers sent to reap the mineral wealth at the center of the galaxy. The high gravity environment, combined with the punishing mining conditions eventually changed their morphology. The subsequent generations became gradually shorter and stockier. The Squat Home Worlds were isolated from the rest of humanity during the Age of Isolation. When they were reunited with the rest of the Imperium, wars were launched against them in the belief that they were aliens. Eventually the Squats were accepted, along with other abhumans, as being human in nature. They are now considered a separate race, though they are fundamentally human.
The Squat Home Worlds were colonized during the Age of Founding (known to the Imperium as the Dark Age of Technology). The planets were rich in minerals and ores human civilization desperately needed, and so quadrillions of moon-sized ships full of miners and explorers were sent out. The worlds were high gravity with brutal environments. The settlers dug deep into the bedrock of the planets to survive, and so the first strongholds were born.
The Age of Trade, which lasted for almost three millennia, saw a decrease in the warp storms isolating the Home Worlds. The Squats traded with the Orks and Eldar during this period. The Age of Trade was ended in an enormous attack on the Home Worlds by the Ork Warlord Grunhag the Flayer. The Squats pleaded for assistance from their Eldar trading partners, but were rebuffed. This led to the Squats' enmity against Orks and Eldar that has lasted through the Age of Wars into the current Age of Rediscovery (or Age of the Imperium). The Forces of the Great Crusade launched wars against the Squats in the belief that they were aliens, but eventually the Squats were accepted, along with other abhumans, as being human in nature. The trillions of Squat Strongholds joined the Imperium, but continued to retain their autonomy as an independent but allied empire to the Imperium.
The Home Worlds maintained trade and mutual assistance with the Imperium, trading military hardware, allowing Commissar military advisors to join their armies, and sending recruits to the Adeptus Mechanicus. In the forty-first millennium, a Tyranid hive fleet of Behemoth (Citadel Journal 33; "Hundreds of years ago") threatened to sweep through the Home Worlds, capable of destroying the Squats as a power in the galaxy. The council of Ancients decided to unite with humanity to provide a unified front against the Tyranids, and the uncountable trillions of Squat Homeworlds were integrated by the Imperium (almost tripling its official size) as DaoT protectorates over several centuries before facing off the Tyranids during the attack by Behemoth.
Although the vast majority of the Squat race joined the Imperium, a few Squats remained separated from the council and carried on. Some became pirates or mercenaries, others joined the Imperium and the Imperial cult after acknowledging the Emperor as their God, while many fought for the Imperium in exchange for the promise of being granted new Homeworlds and building up the Squat race. These squat outcasts were gradually named the Demiurg, the Squat word for defiant, as they turned their backs on their ancestoral strongholds to seek freedom from the Imperium.
The Squats carried grudges for millennia, and none so strongly as against the race of Orks, who betrayed the Squats on more than one occasion and inflicted many losses upon them in war.
The Squats do not worship the Emperor as a god, but instead (akin to most Space Marines) see him as an extremely talented and powerful mortal. The Squats have their own religion in place of the Imperium-prescribed religion: they worship their own ancestors. They believe their ancestors to be very powerful overseers of their actions, with all Squats having a chance to join them in eternal happiness and share their power to watch over still living Squats. Squats believe that the only way of being refused the chance to join the ancestors is to dishonour themselves by committing a horrible moral crime such as murder. The souls that are turned away from the ancestors' realm are doomed to wander as ghosts, haunting the living and urging them not to repeat their mistakes.
Squat technology is based upon the heavy mining equipment they brought with them to the Home Worlds. During their isolation from the rest of humanity they adapted it for other uses, notably exo-armour which was engineered from heavy mining suits. Squats continued to innovate and invent, focusing most of their efforts on expanding and improving their logistics and mining capabilities, until they stood unrivalled in terms of reliability and efficiency in all of their technologies, from their ships to their mining-war processors, to even their homes aboard hive-fortress land trains and underground continental bastions. As a result, the Squats have developed technologies such as neo-plasma and warp cores far in advance of anything the Imperium owns in those fields. Some Squat technologies were absorbed into the Imperium, especially tunneling vehicles and weaponry such as the Termite.
In Warhammer 40,000 Squats had a similar armament to Imperial armies, coming with las and bolt weaponry as standard, though now they like their weapons to be multi-purpose, like the Ion casters that can cut through rock and people alike, or the heavy sonic and seismic ordinance used to carve up huge tracts of land and devastate entire armies. Armies also included squads in exo-armour supported with bikes and trikes. Squats were characterised in Epic with each stronghold possessing armadas of millinillions of colossal planetary-scale war machines, including the Land Train (which supported many different cars, including the Dragon Car, the Berserker Car, the Mortar Car and the Rad Bomb car), Leviathan (used as a mobile infantry transport, capable of holding almost a hundred brotherhoods of squats within), Cyclops (a spaceship weapon mounted on a Colossus chassis and used originally to devastate rival Squat warlord's war machines) and Colossus.