Today I was playing in my Redstone World.I was going to test my Anvil Cannon and I found Squids in the water of the cannon.I killed some then I took a Screenshot.I think is an Bug on Spawn.
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Agreed with Tristen Allen.
Squids spawn in any single block of water. This is actually very useful sometimes, and fairly comical the rest of the times. xD
This is just how they spawn
" They can be found in water of any depth, in any biome, and spawn on any difficulty."
-http://www.minecraftwiki.net/wiki/Squid