OK we're all adults here, so really, how on earth should I use a squat toilet?

Here is a video that explains how people use this thing.

Seriously, it's informative and visually presented and makes it much clearer.

Ok, I'll take the risk in answering ;)

Anyway, I'll take the notes from a Wiki How link, and add in bits from past experiences...

1. Bring your own toilet paper. I used to think this was ridiculous. How could a public bathroom NOT have toilet paper? Then I went to Egypt where the majority of our group had Delhi Belly AND you had to pay for a couple of squares of toilet paper! Then in Central Asia where we were ill much of the time, one eventually took to carrying toilet paper. It's not much effort, but just one emergency totally justifies it!

2. Pour some water in the toilet - it makes it easier to clean. There's often a bucket nearby.

3. Pull down your pants or hitch up. From a guy's point of view, this gets tricky - you don't want your pants on the floor, but too high and there's ... obstruction.

4. Squat with your heels flat on the ground. You might be used to squatting on the balls of your feet, with your feet close together, but this position is very unstable and hard on the knees. Squatting with feet hip-width or shoulder-width apart and with your feet flat is easier to hold for an extended period of time (if you're in Asia, you might notice many people squatting like this in public while waiting). If there are ridged foot rests, put your feet on those; otherwise, plant your feet on either side of the toilet and squat all the way down. - This is genius, my biggest fear with these toilets has always been falling over.

Also the direction you face differs depending on the toilet. If you keep finding yourself tipping, try turning around. It doesn't matter as long as your aim is true.

Also worth checking your stuff in your pockets - you don't want them to fall out as you tip.

Finally: Do your business. This part I leave up to you.

Bonus tips

As a guy, it's worth urinating first as it's easier standing up and decreases the risk of wetting one's trousers.

In some places (Uzbekistan, for example) the stalls are low, and you can literally look at the person next to you, have a chat, ask them to pass any available paper, and totally blame whoever made the loud noise. This is very awkward for some at first, but once you get over it and realise it's just not a big deal, it's ok.

If it has a flush, don't flush until you're standing. Big risk of splash damage.

Paper goes in a bucket or container nearby - NOT in the toilet. It can cause the toilet to actually clog.

EDIT

By coincidence, a travel blogger just tweeted his blog post on 'The Art of Squat'. A well written read.

Nobody seemed to have given emphasis on what I consider the most important, the position of your arms when doing it: they must be extended away.

No:

Yes!

I live in China and got used to them squat toilets, they are actually better for the transit, and learning this position is good for many other purposes, like waiting for the subway, watching the sun rise nearby the shore, or doing your little affair in the country side. They are also much more hygienic.

In India I have seen mix toilets, where you can seat if you are bold enough, but you can also squat on top of the seat. That's even better.

This is funny. When I first read the question, I thought it a humorous prank. But, half way through the page, I was sort of convinced that it may possibly not have been intended to be.

I have used squat toilets for nearly all my life. At home, we have both the squat toilets and the sitting ones. I don't mind either, but I find the squat toilets to be more hygienic, especially when they are shared among people (especially in the case of public toilets), than the normal, sitting ones. You can probably take a guess why.

I'll be honest, I've never used a squat toilet with my trousers still hanging down my knees. I can't ever imagine doing that. In all our washrooms, we have ample hanging hooks. So every time I use it, I take off my trousers/boxers. It's much easier that way, and you don't have to worry about trying to keep your trouser/boxer from getting dirty or soaked. In other words, you can be at peace with yourself. :)

So you squat down with your behind facing the wider side of the toilet opening (don't attempt to sit the other way round, lest you want to risk making a mess, for obvious reasons). You can decide to squat down in whichever fashion you feel the most comfortable and keep your arms bent a little and pressed against the length of your thighs. Yes, after a period of time, your legs will start to get tired and then numb. That's just one of the things you'll have to get used to or learn to deal with.

The water pot, or what is popularly known in the Subcontinent as "lota", is what you fill water with. I hold it with my right hand, pour the water down, and wipe off with my left. That's only if you wash with water. If not, you can use the tissue roll which is supposedly fixed into a roll holder at an arm's reach from the toilet. If a toilet doesn't have it and you are only used to using a tissue roll, you ought to get one yourself before embarking on this mission. As someone pointed out already, be sure to run the flush of the toilet after you've finished and got up from squatting down. In all our washrooms, we also have washstand nearby, so when we are done working on the toilet, we get up and wash our hands, and then put on our trousers/boxers/whatever, and also flush the toilet. A word of advice though: If you don't have a tissue roll and are planning on washing with water in a public toilet or a toilet not at home, be sure to fill the water pot first before doing anything. I know it sounds silly, but it has happened to people I know in a lot of public washrooms. In some places, the water supply does run out, maybe because the tank providing the water got empty and the owner or person in charge forgot to run the water motor to fill it up that morning.

And that's pretty much it. It's not really rocket science -- well, maybe.

Most of the answers here cover most bases you need to know so I'll try to cover topics not mentioned yet.

• Do a short flush / send a bit of water down the pan before you begin. It'll help sending everything down later.
• Washing up after you're done: Sometimes, you find a soap bar left inside a toilet instead of liquid soap. I'd suggest you to use this for cleaning your non-dominant hand only. If such a separate bar is not provided inside the toilet, then use any soap you get near sinks outside to first clean your non-dominant hand, then both hands. Check that the area under your nails is clean as this can be cause for ending up Delhi Belly. Alternatively, carry alcohol-based 'dry' hand disinfectants so that after washing your hands with water (thoroughly!) you can disinfect them. This can be easier than packing liquid soap or toilet paper into your luggage.
• If travelling in India, you can find hawkers on trains, railway stations, bus stops selling 'soap paper' or 'paper soap'. These are thin strips of waxed paper dipped in soap, and you tear out single 'pages' from a matchbook-sized booklet to clean your hands with. (Yes, you do need to wet them with water. Place in your palm, hold under a tap, and lather up.) You can buy a couple of these really cheap (ballpark: $1 or less) and they are easy to carry even inside a wallet.
• In SE Asia, if you go to villages or areas without plumbing facilities (sometimes, even major beaches), you could come across toilets without taps. There's usually a water reservoir inside the toilet with a large ladle-like water pan. Fill this up and keep handy before you sit down, as moving about once you're done can be messy.
• Natives will usually pull the upper half of trousers (jeans, etc) down to knees and then squat down so it stays gripped there. It's a hard thing to do and I for one prefer taking them off completely. If you don't find hooks to hang them, try hanging on door latches or wedging them through door handle loops. Definitely not something you try with your best trousers, but jeans / cargoes can take the beating. Failing this, keep them on the floor on any dry area on the toilet floor (squatting is a lot more comfortable with trousers off). If the floor's wet...then you're in a shitty toilet. Deal with it.
• Squatting Western toilets: I've tried hard to find a picture of this curious beast. It's a Western-style sitting toilet...with the toilet rim replaced with an Oriental-style squatting rests. The idea is you can sit or squat - whatever is comfortable with you. Unfortunately, this means if the person who used the toilet before you squatted, chances are the toilet rim will be dirty. Clean this with water before use.

I grew up with those as well and only positive that comes out from using those is that you get a good work out and avoid keeping reading material in your bathroom. I am not sure about other parts of Asia but in India they mostly have western toilets in metropolitan cities. I had a tough time adjusting back to the squatter when I went back after 10 years.

• Removing your pants and then squatting is the most efficient way.
• It's best you use water instead of toilet paper (it helps flow poop towards hole)
• You'd poop ideally close to the hole
• don't just squat but "spread the eagle"
• If it's taking long then try to rest one leg at a time by squatting just on one leg

All this help won't come in hand when you really just have to go. Everything will fall in place when you just have to go :)

I've read through all the answers and comments and, if I'm not mistaken, they seem to be always written by men. Using a squat toilet is surely much more complicated when wearing trousers, as most men do around the world, so I appreciate your points and debate.

Squat toilets are not as much of a problem from a female point of view, if we think of women wearing "traditional" clothes, which means skirts of various lengths. True, we are in the same predicament as men when wearing pantyhose or trousers, and this may be one of the reasons why squat toilets have become less common in western Europe than they were.

I live in Northern Italy and squat toilets are still to be found in public places (restaurants, bars, railway stations, ...) Frequently, they are meant for gentlemen's toilets, which however are normally used only for peeing (in which case men usually stand), whereas ladies' toilets are generally equipped with the western-style toilet.

This is not always the case, though, so when I find one, my first preoccupation is to remove everything from my pockets for fear that I may drop something. I suppose that in Italy squat toilets are preferred to the other type in public places because they are easier to clean; normally they can be flushed as the other type of toilet and toilet paper can be flushed along with the rest.

I encountered the same kind of toilet in Sweden when visiting my former boyfriend's summerhouse on one of the islands of the Stockholm archipelago; there was no running water in the house, so the toilet was a wooden cabin outside with just a hole in the ground; I never got to know where the dejections went, but the cabin surely stank...

EDIT - ADDITION

I recently took part in a two-day seminar in an ashram of the Hindu community near Savona, Liguria (still Northern Italy). I don't know whether it was because of the connections with India, or because a squat toilet is less expensive to install and easier to keep, but that is what I found in my room. To my dismay, I must add, because since my previous answer I've undergone two or three orthopaedic occurrences which now limit my ability to use such a toilet. I wonder how people in Asian countries can still use squat toilets when they grow old...

I'll add a short answer to address the central point in the question: "trousers seem to be blocking an important thoroughfare! How the hell is this supposed to work??!!"

I traveled in Asia for a while and at first had the exact same problem. For the first few months there, I would actually completely take my trousers off before using a squat toilet. But then I discovered that this fear of trousers "blocking" something is just based on a poor understanding of actual anatomy. Do an experiment in the privacy of your own bathroom: Pull the pants down to your knees and squat - you will see that either there is no blockage (your trousers are far away, way forward of the "important thoroughfare"), or if they're not far enough, you can easily grab them with your hand and push them forward - you'll see that there will be a huge air gap between any of your clothes and the "thoroughfare".

And as a bonus, it is actually cleaner than sitting on a western-type toilet, where your trousers are pulled down to the floor which is in many places wet and dirty. With a squat-style toilet, only the soles of your feet ever touch anything on the floor.

People in India who use Squat toilets at home wear a specific attire called 'Lungi' for this job. This makes the whole process more comfortable.

^{Public domain image of men wearing lungis in Kolkata (Calcutta) thanks to WikiMedia Commons.}

In most of the public toilets, you will find space above the door where you can hang your trousers.

The real problem would be the shoes. I don't think there is a solution for this. You will definitely end up with wet socks. This is not a problem with locals because they use slippers (sandals) for toilets. You will hardly see a local entering a public toilet wearing shoes.

Part of the problem westerners have with squat toilets is not knowing how to squat.

The locals probably consider it impolite to have your knees apart when you squat, but they've been doing it all their lives.

If you're a westerner, you'll find it much easier to squat, on the potty and when social events require it, if you keep your knees far enough apart to relieve the stress on joints.

(oh, and in the US, definitely, put the toilet paper in the toilet. In the ladies, there's often a small trash bin for 'feminine hygiene products'. In rural areas, not using an excessive amount of paper is considerate, as rural sewage systems are often limited).

I've travelled by bike across Turkey, Iran, Pakistan etc. When you go into the toilet, make sure the hose pipe works / there is a water source and a bucket to fill to wash your behind. Pull your trousers / skirt fully down / up (respectively) and assume a fully squatted position (legs fully bent at the knees, as if you are going to sit on the ground, but don't (obviously)).
keep your arms forward for balance and relax whilst nature takes its course. Once you've finished, simultaneously spray the hose / tip a bucket of water at your behind whilst wiping with your left hand until its clean. Then hope there is a towel to dry off. Wash your hands well with soap after and enjoy anal hygiene.

In the touristy areas of Japan (when I was there in '94) you would find 'how to use these toilet' instructions in many of the toilet cubicles or on bathroom walls.
Their squat ones look a bit like a slipper and yes, they would play on that in the instructions.
As someone who grew up with sit down toilets, I have always chosen squat toilets where offered the choice. Specially when many people use the facilities, they are easier to keep clean and even when less clean there is less contact.

By the way, Japan has a solution for the 'dirty feet' problem by having special slippers to be used in the bathroom/toilet area, which are usually red while the norm for indoor slippers (used by visitors) is brown.