* Inactive Account Policy: http://support.twitter.com/forums/26257/entries/15362-inacti...
* Trademark Policy: http://support.twitter.com/articles/18367-trademark-policy
However, Twitter have been known to free up unused usernames by request.
Two years ago I used the following method, YMMV[1]:
Send username@twitter.com an email with the subject line "Change username to existing, inactive username" with the following content:
---
* Username I want: @SquattedUsername
* Existing username:@MyRubbishCurrentUsername
* Change username: not start again with new.[2]
---
A day or two later my account was automatically transferred.
[1] This method assumes that you currently have a Twitter account and the 'squatted username is inactive.
[2] If you want the Tweets from your current account to be transferred (rather than deleted/archived) say this. Otherwise state that you would like to start afresh.