Here is a “bare-hands” approach.
Let $X$ be your group generated by $x^2,y^2$ and $xy$, $A$ be the free group on three generators $a_1,a_2,a_3$. There
is a unique group homomorphism $f: A \to X$, sending $a_1$ to $x^2$,
$a_2$ to $y^2$, $a_3$ to $xy$. That homomorphism is obviously
surjective. So all you need to show is that $f$ is injective, i.e.
$f(a)\neq e$ whenever $a\neq e$.
In both $X$ and $A$, every element has a unique reduced writing (i.e.
expression not containing terms of the form $tt^{-1}$ or $t^{-1}t$). This allows
us to identify each element with a unique word, called its “normal form”, and
saying that an element ends with a certain word.
Let $a\in A,a\neq e$. Then $a$ must end with something, there are
six cases, and I claim that
(1) If $a$ ends with $a_1$ (in $A$), then $f(a)$ ends with one of $x^2,yx,y^{-1}x,y^2$ (in $X$).
(2) If $a$ ends with $a_2$ (in $A$), then $f(a)$ ends with $y^2$ (in $X$).
(3) If $a$ ends with $a_3$ (in $A$), then $f(a)$ ends with one of $xy,x^{-1}y$ (in $X$).
(4) If $a$ ends with $a_1^{-1}$ (in $A$), then $f(a)$ ends with $(x^{-1})^2$ (in $X$).
(5) If $a$ ends with $a_2^{-1}$ (in $A$), then $f(a)$ ends with one of
$xy^{-1},x^{-1}y^{-1},(y^{-1})^2$ (in $X$).
(6) If $a$ ends with $a_3^{-1}$ (in $A$), then $f(a)$ ends with one of
$yx^{-1},y^{-1}x^{-1}$ (in $X$).
Once this property is stated, its verification by induction on the length of $a$
and by case disjunction is purely mechanical. I can supply further details if you need
them.
So we have by this disjunction in six cases, that $f(a)\neq e$ : $f$ is injective,
which concludes the proof.