In this paper, we provide a geometric analysis of a new hysteresis model that is based upon singular perturbations. Here hysteresis refers to a type of regularization of piecewise smooth differential equations where the past of a trajectory, in a small neighborhood of the discontinuity set, determines the vector-field at present. In fact, in the limit where the neighborhood of the discontinuity becomes smaller, hysteresis converges in an appropriate sense to Filippov's sliding vector-field. Recently, however,in [2] it has been shown that hysteresis, in contrast to regularization through smoothing, leads to chaos in the regularization of grazing bifurcations, even in two dimensions. The hysteresis model we analyze in the present paper -which was developed by Bonet et al [3] as an attempt to unify different regularizations of piecewise smooth systems -involves two singular perturbation parameters and includes a combination of slow-fast and nonsmooth effects. The description of this model is therefore -from the perspective of singular perturbation theory -challenging, even in two dimensions. In this paper, using blowup as our main technical tool, we present a detailed geometric description of the dynamics. Specifically, this description allows us to prove existence of an invariant cylinder carrying fast dynamics in the azimuthal direction and a slow drift in the axial direction. We find that the slow drift is given by Filippov's sliding to leading order. In the case of grazing, we identify two important parameter regimes that relate the model to smoothing and hysteresis. In particular, in one of these regimes we prove existence of chaotic dynamics through a horseshoe obtained by a folded saddle and a novel return mechanism.