The way shorting is done, is you borrow shares from someone who owns some, and then you sell it. You now have cash. Later, you can go and buy it from someone (for hopefully less than you sold it for) and return the share. You keep (or lose) the difference.

So yeah, if the long holders just keep holding, it'll keep going up and those that are short will owe more and more to their lenders (and paying more and more in interest, I think). Even if they want to cover their short, there's not enough shares to go around for them to buy. This is why it's being called an "infinite squeeze". They've shorted the stock more than there are actually shares out there, so it's difficult to cover.

There's some more factors at play when you consider option contracts, I think.