How deep you should squat depends on two things:
* Goals: if you're an o-lifter, squat as deep as you can possibly go, aka ATG (deeper squat = ability to snatch/clean more weight). If you're a power-lifter, squat just below parallel (less ROM = more weight moved). If you're just doing general strength training, anywhere between these two ranges is fine. I personally find ~2" below parallel to be a very comfortable depth where I get a really solid bounce reflex from my hamstrings.
* Flexibility: note that the minimum depth in all cases is just slightly below parallel. However, the caveat is that you should never squat to a depth beyond which you can maintain a safe lumbar arch. Most people can't even get to parallel without rounding their back when starting out, so lots of flexibility and back strength work is necessary. Even with lots of training few people can do an ATG squat without compromising their back, so unless you absolutely need that kind of depth (again, competitive o-lifting is one of the few good reasons), then you are probably best staying a bit higher.