* Molecular Structure: Liquids have molecules that are closer together than in gases, but they still have some freedom to move around. This is why liquids have a definite volume but can change shape.
* Compressibility: While liquids can be compressed, they resist it much more than gases. This is because the molecules are already fairly close together. Think of it like trying to squeeze a sponge full of water - it's hard to get much more water in there.
* Pressure: Increasing the pressure on a liquid *will* reduce its volume slightly. This is why hydraulic systems work - pressure applied to a fluid is transmitted equally throughout.
So, why do we think liquids can't be squashed?
It's mostly because we don't usually notice the compression. It takes a lot of pressure to make a noticeable difference in the volume of a liquid.
In summary: Liquids are not completely incompressible, they just resist compression much more strongly than gases.
