Squid

Squid are a new passive mob. They were added in the Minecraft beta 1.2 update. Squid drop ink sacks when killed and can be found in water. They spawn on any difficulty and do not attack, similar to the passive mobs found on land. http://www.youtube.com/watch?v=mPAQYjGcFRU

Behavior
Squid swim around in water, sometimes in groups and stick to the seabed, swimming into sand/dirt on the seabed quite often. Listen for a sound that sounds similar to dirt/sand breaking. They often swim fairly deep, and are difficult to see due to their dark complexion and unless seen from a distance are almost impossible to locate from above. When they move about, their tentacles open and close. This is the easiest thing to watch for in the deeper areas when squid hunting. Here is the dirt/sand sound they make. 

Drops

 * 1-3 ink sacks

Squid in game.