This is an example of a sentence that uses a double negative. Replacing "squat" with "nothing," we have "I don't know nothing about..." This double negative is a feature in colloquial English speech, but is very rarely used in writing, unless someone is being humorous. Due to the potential logical confusion that you pointed out ("You don't know nothing? So, you know something???"), many English speakers find the usage of double negatives to be outright incorrect, and discourage their use in all circumstances. Despite those who find the use of double negatives incorrect, you will hear them quite regularly in everyday English. When used by a speaker of a standard English dialect, you can understand them as simply being especially emphatic forms of regular negative expressions. For example: "I don't know nothing about..." = "I REALLY don't know anything about..." You can find a fairly long list of sample double negatives (some of which even confuse me!) on this site: (http://examples.yourdictionary.com/examples-of-double-negatives.html) I encourage you to keep an ear out for more double negatives in English speech in the future, but don't recommend their use to an English learner unfamiliar with their exact usage. As you rightfully pointed out, they can be quite confusing, even to native speakers at times.

I defer to John McKinnon on the origin of "diddly-squat." However, I will add that it is quite common to hear the similar form "you don't know s- -t." In any case, the expression is what it is, and it means what it means. "Double negatives" are interesting. Expressions like "I don't got none," "It ain't goin' nowhere," and "I ain't gonna do that no more" are said to be bad grammar, which they are. The correct forms are "I haven't got any," "It isn't going anywhere," and "I'm not going to do that any more." It is sometimes said that the reason double negatives are bad is that "a double negative becomes a positive." That's not really true. In informal speech, a double negative simply intensifies the negation. "I ain't got none" does not ever mean "I have some." Oddly enough, in educated speech there is an example of a double negative meaning a positive. This is the "not un-" construction. George Orwell criticized it in "Politics and the English Language." "A not unjustifiable assumption" means a reasonably justifiable assumption. "Not unlike a seventeenth-century Shelley" means rather like Shelley. He suggested "curing oneself" of the "not un-" habit by "by memorizing this sentence: 'A not unblack dog was chasing a not unsmall rabbit across a not ungreen field.'"

It's an expression, some expressions don't follow normal grammatical rules because they're originally used by a group of people that don't. Here's some more info: From "Why You Say It" By Webb Garrison (Rutledge Hill Press, Nashville, Tenn., 1992): "Diddly-squat. Strictly American in origin, that expression sounds suspiciously like a pair of modified barnyard terms - but isn't. Carneys (carnival workers) who traveled from town to town working one county fair after another developed their own private language. They had to do so in order to attract potential gamblers who would pay for a chance at a gimcrack prize. 'Diddle-e-squat' seems to have entered the carnival talk to name money - often a nickel or a dime, since that was the going rate for a game of chance. Frequently used to hide talk about a small amount of money, it was an easy and natural transition for the carnival term to indicate very little of anything."

Double negatives cancel each other out to become positive.

However, in speech, depending on the intonation and body language (also used in novels when a character is talking in a particular dialect), you can tell when someone is using the double negative as an exaggerated way of stressing what they are saying.

It is still grammatically incorrect, but it can be understood the way it's intended.

If you think about Joey in general, he tends to be comedic and the others treat him as less educated. He may be less educated. He is also funny and dramatic. When he said what he did, he was being dramatic.

Below are lengthy elloquent answer to choose from. There are two things going on here. . It is common in the English of some people to say things like "I don't know nothing". It means "I don't know anything". It was likely started by people with poor grammar. It has stayed common in just a few expressions. Taken litterally, it forms a double-negative - but this is irrelevant, as they mean a negative. They mean to say "I don't know". The second thing is "squat" probably also explaned at length below. It means "nothing". . Usually you can tell the negative+negative is intended to be negative from context. In some areas, the poor ones are so common, they may feel they are the only ones. :) Real double negatives, intended to be positive are fine and useful. They are just likely to confuse some people. This gem is not uncommon. The results are not inconclusive. His rebuttal was clearly not nonsensical. The price of the car is not insignificant.