A squib is a small firework like a banger. Obviously, if it gets damp it doesn't go off very well, so if you want to say something is not very good, you say" that went off like a damp squib", meaning pretty badly.
A squib is a small firework. If it gets damp it does not go off very well, if at all. It is a let down. This is why if something something is a bit of a let down or disapointment it can be described as "a bit of a damp squib).