Question on squats

I've been hitting the gym everyday and here is the general routine for me.  I work out on the elliptical for an hour, with the focus on my butt and upper thighs.  I can tell a big difference in just the last few months. I also spend about 30 minutes using free weights and some of the machines that focus on ab and upper body work.

Here's the question:
I keep reading that squats are really the way to go to make a real difference in your lower body. One problem I have with this is my knees.  They're old !  :)   I can't do the deep squats, so they're out. Painful and I can manage maybe one.   The trainer at my gym showed me a shallow squat using hand weights and the bar that you lay across your shoulders (weighs about 12 lbs). I've been doing that the last few weeks, but I'm wondering is this is worth doing.  If I'm not doing the deep lunges,  am I just wasting my time?

Has anyone seen results with this type of squat exercise?