It can work in multiple ways, depending on your goals. Keep in mind, Squid is infrastructure software, not end-user software. There is no one configuration; it depends on what you want to achieve and your environment.
That said, the web site[1] offers great docs with lots of config samples to start from. If you're starting from scratch, take a look at CARP configuration. Squid also speaks ICP and HTCP.
Squid is one of the rarely-sung heroes of web content delivery.
