I get knee pain when I don't go down far enough. I don't think you need to go too far past parallel on the squat, but make sure from the side view your legs look a little more like this 7 rather than like this >
Your knees should be more above your feet, and not extended way in front of you. This means you need to kind of sit into the squat. Focus on feeling the power coming from your butt/upper quad area.
The best way to do this is to start the squat with you hips first, while keeping the knees somewhat straight at first.
Also, try experimenting with bar placement on the trap area. I like to use the low bar method, which also means I lean my torso forward more to keep the bar path above the feet. If you keep the bar high on the traps, then the torso will be slightly more erect. See pic below.
and make sure the movement is controlled. Don't bounce out of the squat because that will surely kill your knees. One other tip is to create an internal "belt" by sucking in a breath of air and holding your abs tight through the movement. Don't blow all the air out at the bottom or you'll release the core tension.
Like Choopa said, don't rely too much on a belt. I only use mine if I'm going for a max lift. Same goes for deadlifting.
I see a lot of guys at the gym with a bowed back and go halfway down with the their knees way out in front. I feel bad for their poor knees and back.