What do squats do exactly?

ive been doing squats since 2 or 3 monthes now i noticed my thighs look bigger but in a good toned way and my *** looks rounder and perkier also the back of my legs whatever they are called look nicer what else do squats do do they do something to the hip or waist area? also my weight has increased like 2 or 3 kilos but my body looks alot better than before i do squats with 1-5 kilo dumbells please any one has more information about squats?