Wackford Squeers is the sadistic headmaster of Dotheboys Hall. During a particularly unhappy time of his life, Nicholas Nickleby acts as his low-paid, over-worked assistant. Squeers runs the school with a rod of iron, routinely subjecting the unwanted boys in his care to beating and starvation. For good measure, he doesn't teach them anything of value, thus keeping them in a state of complete ignorance.
He's assisted in his endeavors by his equally revolting wife, who spoils their grossly overweight son. His enormous weight is cynically used by the Squeers to show the outside world that the boys of Dotheboys Hall are well-fed and properly looked after.
Nicholas finds the whole atmosphere of this pathetic excuse for a school completely intolerable. To make matters worse, he becomes an unwelcome object of affection for Fanny Squeers, the Squeers' shrewish daughter, who's got it into her head that Nicholas has the hots for her.
But what finally pushes Nicholas over the edge is Mr. Squeers' ill-treatment of Smike. Today, we would say that Smike has learning disabilities, but in those days children with his condition were dismissed as stupid and lazy. And so Squeers takes especial delight in singling out poor young Smike for brutal thrashings. Nicholas can't take such wanton cruelty any longer and so he gives Squeers a taste of his own medicine, giving him a damn good thrashing in front of the boys before hastily leaving Dotheboys Hall once and for all, with Smike in tow.