A squib is a miniature explosive device used in a wide range of industries.
Origin of the phrase "damp squib"
While most modern squibs used by professionals are insulated from moisture, older uninsulated squibs needed to be kept dry in order to ignite, so a "damp squib" was literally one that failed to perform because it got wet. The phrase "damp squib" has since come into general use to mean anything that fails to meet expectations.
The word "squib" has come to take on a similar meaning even when used alone, as a synonym for dud.