It is much better for your knees if you squat deep.
If you'd like a very detailed explanation of why, read Mark Rippetoe's "Starting Strength" or "Strong Enough".
Both of these books cover it in specific detail.
One simple way to check your own squats is to get them on video (this better than using a mirror)and make sure the crease of the hip joint goes below the top of the knee.
For example, I took a video of my bodyweight squats earlier today to check my opwn technique. Getting deep enough with big loads starts with geting deep enough with small loads first. Cheating hinders your progress.