Why does a square wave in frequency domain have less amplitude?
Any repeating waveform can be constructed from a series of sines of integer multiples of the fundemental frequency of the waveform. These are the harmonics. Using Fourier expansion with cycle frequency f over time t, an ideal square wave with an amplitude of 1 can be represented as an infinite sum of sinusoidal waves of odd harmonics of the fundemental.



This is represented graphically in the animation below.



Figure 1. This fabulous illustration of the Fourier Transform by Lucas V. Barbosa on Wikipedia's Fourier transform page shows the transformation of a periodic waveform from the time domain to the frequency domain. The frequency plot shows the relative strength of the harmonics with clarity that could not be obtained from staring at the time plot.


It should be apparent that the more square the time domain waveform is then the more harmonics you will have and these should be visible in the frequency domain.
It should also be clear that the amplitude decreases with the increasing frequency.