Yes, squat in the pool does work. Only the parts of your body that are submerged in the water lose their weight. That excludes the parts of your upper body that are above the water. The gravitational force created by your upper body weight is greater than the floatation force created by the water, therefore the resistance is placed on your legs, similarly to squating on dry-land.
This 10 minutes workout is performed in the shallow-end. The shallower the water, the more difficult your squat workout.