I believe this website has a good explanation. Here is an excerpt:
"Squatting .... securely seals the ileocecal valve, between the colon and the small intestine. In the conventional sitting position, this valve is unsupported and often leaks during evacuation, contaminating the small intestine." http://www.naturesplatform.com/health_benefits.html
There is a lot of info if you google "ileocecal" and "squat"