Some of it is normal fluctuations in wildlife populations. If there is shelter, food, and few predators, it is easy for populations of mice, voles, rabbits, or squirrels to grow very quickly.
As far as the squirrel goes, it could just be a fungal infection of the skin, which can clear on its own and isn't a danger to people. But it could be mange. And mange is likely to kill the squirrel eventually. And it is contagious to other squirrels. It isn't a problem for people or pets unless you are in direct contact with the squirrel.