They're a good gauge of _lower body strength_, but not upper, just as bench is the reverse. Deadlifts incorporate all, but really you can't use a single lift as a true measure. My bench is good but my squat is absolutely hideous. My deadlifts, when I used to do them properly, were really good. I had a friend I worked out with who had a great squat but could barely get his weight up on bench.
Dunno how much validity is to it, but most people recommend legs evenif you don't actually care about them - something about jacking up overall body testosterone levels or something. Basically the premise is you would not find a guy with an incredible bench and chicken legs, because the body won't allow itself to get that much out of whack. That said I once did see a guy with chicken legs and a huge upperbody. Only once, but it was weird.
I do squats, but I go light with high reps and never go all that hard on them. First of all they are a truly abhorant excercise. Some people like them but I don't. I find leg pain to be intolerable, probably on account of how large the muscle is; nobody has a problem going to failure with a bicep, but when you're doing it on a huge muscle it takes a lot out of you. Additionally, probably 99% due to bad posture, my knees and lower back are rarely interested in enduring large amounts of weight. I can almost picture my knees poppping out when I do squats. I've been working out for a long time and more times than not I don't even put 200lbs plus on squats, which is why pathetically they've not gone up in weight in a decade (I'm only 27!). I went so balls out when I was 16-18 that I've never had that motivation again, and I know I never will, so I'm satisfied really to keep what I managed to get all that time ago.
Bench I've been creeping up, because I find it more enjoyable, and did hit a new personal record last summer (which is more than my squat, and I know that's indicative of poor body balance, but I've always been able to bench more than I squat, though I can dead more than I bench if I care to go that hard).
I will stop rambling now.