I have two rectangles that collide with each other, this isnt hard to figure out. I cant quite get how to make them bounce off each other. I dont want to simply exchange velocities and angles. What should happen is if the first square's top edge hits the second square's bottom edge and the first square was moving at an angle of 45 degrees, the first square's angle after collision should be 315 degrees. Like so:
before

     ----
     |  |
     ----
      * ( collision here )
    ---
    | |
    ---
  ' ( moving this way, 45 degrees )
 /
/

after:

    ----
    |  |
    ----
      ---
      | |
      ---
          \
           \
            ' ( moving this way, 315 degrees )

I do some estimations to see which side was hit and then calculate the resulting angle. The problem is when the estimation fails becuase the rectangles hit each other on a corner and its impossible to tell if the side or bottom was hit. Ill post the code I use to determine this estimation, but is there any better way to determine this kind of physics?

I'm not quite sure which one you want but it may be atan2... I did this same thing - I think I added or subtracted 90 degrees and used atan2 to figure out the resulting angle. I would tell you definitively but I'm working on resuerecting my source repository now...

Once I get my repository back up I'll post a real answer unless someone else does. I know I did the exact same thing in my space shooter.

Since your dealing with rectangles only, the situation is greatly simplified.

All you have to do is this: If a the top and bottom of a rectangle collide, invert the y component of the velocity. If the left and right collide, invert the x component.

for a given velocity (a speed S and direction theta), the components are:

x = S * cos(theta);
y = S * sin(theta);

so what you do when you detect a collision is this:

-break the velocity down to x/y components.
-flip the x or y velocity.
-re-compose the components back to a speed and an angle.

to re-compose, just do this:

S = S (the speed does not change, only the directional component of the velocity)

the angle is atan2(y, x)

Just be careful to convert between degrees and radians where appropriate and you should be all set.

P.S. I had to deal with this sort of thing in my game Worminator when making the mortars bounce around. I just keep the x/y components of the velocity stored seperately as two floats. That way its easier to move objects around, flip velocity components, and change the direction of the character. For example, if you want to move left while falling in the air, you just set the x component to -1 units/sec or whatever you want, and you dont have to worry about recomputing the new angle of the velocity which would be an ugly sum of the gravity vector and the force you apply to the object to make it move sideways.

Right, because if you have perfect rectangles, the corners will never collide. There's always an epsilon distance. In the real world this is also true, but there are also these angular momentum issues involved. And when two real world boxes collide (almost) by the corners, the corners will break and act like if the corners were rounded in the first place. In your simulation you have to decide how much of the real world stuff you leave. Neglecting the corner collision is just one level of simplification.