How do I fix this? Vacuuming only helps a little. The carpet is mushed from being stepped on all year in some areas, and other areas it looks like it did when we bought it. This makes the mushed area very noticeable. It is a lighter color than the carpet was originally.
Getting a hot steamy cloth well rung out and rubbing in small circular motions helps raise the pile from all sides.
then its time to replace the carpet or get some area rugs
You are describing polyester carpet, made from recycled plastic bottles, the squishing effect is permanent. When you replace it, ask for Nylon carpeting. Nylon is the best in the business next to Wool. Also, do not ever administer any so called carpet freshening powders to your carpet, as they are a rip off. Do not use any toy (Bissel or Hoover) carpet cleaners on your new carpet, as they are famous for leaving sticky soap residue in the carpet fibers that will attract dirt/soil like a magnet. This soap residue may also be responsible for allowing the carpet fibers to pack down.
The problem you have is caused by low density -- carpet weight is the ounces a square yard weighs not counting the backing, so 18 ounce carpet weighs 18 ounces per sq yd without backing, etc. Most homes are built by price driven builders, so the weight is low. To make it look more plush, these builders specify long nap carpet, and the combination of long nap plus low weight means the fibers aren't close together to offer mutual support. Hence, crushing in traffic areas. You can steam the carpet (there's a small steam machine available for about 12 dollars) and while still damp and soft, you can brush it with a regular hairbrush to help restore the carpet to a less crushed condition. This problem is especially noticeable at the front edge of stair treads. Best fix is more expensive carpet, but steam and brush helps as long as you keep doing it.
