Here is a quick overview of rabies:
Rabies is an often fatal disease, shed through the saliva of an infected animal. Animals acquire rabies primarily via bite wounds from infected animals. Squirrels can carry the rabies virus. All mammals are affected by this disease. The rabies virus effects the neurological system. Neurological symptoms include aggression, depression, paralysis, seizures, excessive salivation, inability to swallow, and eventually death.
Diagnosis for rabies includes quarantine for 10 consecutive days to observe for above symptoms. Like Riptide mentioned, the only reliable test is the microscopic examination of the brain tissue. (By cutting of the head). Unfortunately there is no treatment for animals with rabies. But as far as prevention goes, there is the rabies vaccine. (There is even a rabies vaccine for humans, but the side effects make you really sick. As far as I know, all licensed veterinarians are required to get the rabies vaccine.