The skin of a squid is basically a magic material that can change colours as they expand and contract. PBS Deep Look calls them tiny water balloons filled with pigment and it's pretty much their strongest (only?) defence mechanism in the open waters. They can change how iridescent their skin is and mimic how sunlight filters down into the water.
It's so cool to see this power in action. Deep Look writes:
For an animal with such a humble name, market squid have a spectacularly hypnotic appearance. Streaks and waves of colour flicker and radiate across their skin. Other creatures may posses the ability to change colour, but squid and their relatives are without equal when it comes to controlling their appearance and new research may illuminate how they do it. To control the colour of their skin, cephalopods use tiny organs in their skin called chromatophores. Each tiny chromatophore is basically a sac filled with pigment. Minute muscles tug on the sac, spreading it wide and exposing the coloured pigment to any light hitting the skin. When the muscles relax, the coloured areas shrink back into tiny spots.