This short video by Mike Bok shows the chromatophores of Longfin Inshore Squid in action. Chromatophores are pigment-containing cells that allow the squid to change their skin color. One World One Ocean has more on how squid and other cephalopods change color:
The skin of cephalopods has chromatophores, special pigment-filled cells that come in a range of colors. The pigments can be black, brown, red, orange, or yellow. These cells are each independently controlled by nerves and muscles, which expand or contract the cell. When the muscles contract, the cell stretches, allowing the pigment to cover a larger area. When the chromatophore shrinks, the pigment is hidden.
