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The middle kid had her nose squashed up against the living-room window and was making faces at us.
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Squashed means "flattened"

Comments  

You are not seeing "squashed up". "Up" is paired with "against". Her nose was "up against" the window and thereby squashed. By the way, standard US English does not recognize "squash up" as a fixed expression, but I can see how it might be used the way you say, and Cambridge does mention it.

 AlpheccaStars's reply was promoted to an answer.