According to Charles Poliquin:
Squatting to parallel (legs bent 90 degrees) not only makes the exercise less effective but, additionally, it increases the risk of injury. First of all, by not squatting the full range of motion, one doesn't maintain proper lumbosacral bodymechanics. When performing the squat movement, the sacrum undergoes a process known as nutation (it tilts forward, relative to the two ilia on either side of it). At approximately 90 degrees of knee bend, the sacrum tilts back (a process known as counternutation) and sets the lifter up for lower back pain.
In order to perform a full squat, flexibility and range of motion must be maintained in the lumbar spine and SI joint, as well as in such muscles as the iliopsoas and hip external rotators - piriformis, gemelli, etc. If the lifter can't squat past 90 degrees of knee bend without the heels raising or the body bending excessively forward at the waist, but can squat all the way to the floor while holding onto something, we know that there are some muscle imbalances in regard to the pelvis/lumbosacral region (iliopsoas, external hip rotators, erector spinae) as opposed to a knee or foot/ankle dysfunction.
Additionally, since the hip joint is considered by many authors as the "steering mechanism for the leg," improper pelvis, hip, and lumbosacral mechanics could manifest down the kinetic chain as chronic or recurring knee/ankle problems. Thus, regular performance of the full squat offers a "screen" for the athlete of his or her lumbosacral/pelvic flexibility, which may prevent injury or muscle imbalances long before they become chronic.
Parallel squats also may be potentially damaging to the knee joint. The original data on full squats causing ligament laxity was obtained in an uncontrolled manner. Recent attempts to replicate these studies haven't shown any increased laxity or knee pain/dysfunction from doing full squats as opposed to parallel squats.
Furthermore, ask any orthopedic surgeon at what degree of knee bend does one perform the Drawer test - 90 degrees. Why? Because in this position, the knee joint is the most unstable, and if you were trying to assess the integrity of the cruciate ligaments, you'd want the least amount of interference from other structures as possible. Bend the knee to full flexion. How much does the tibia move on the femur anteriorly or posteriorly? Very little. However, do the same test at 90 degrees of flexion, and you'll get considerably more movement.
Therefore, you can imagine how much force is on the knee ligaments if the athlete is descending with a weight on their shoulders, and then at 90 degrees - the most unstable point - reversing the momentum and accelerating in the exact opposite direction. Couple this with the fact that most, if not everyone, are capable of squatting considerably more weight to the parallel position than the full squat position, and you've set your body up for muscular imbalances, yet again.