In Ubuntu, Google Chrome sets the system-wide network configuration when you specify a proxy. What does this mean? This means that when you want to use an instant messenger client like Pidgin or another desktop application, it will also use the proxy specified for Chrome. I like Chrome, but I also like to chat. To fix this I added the following lines to squid.conf which was conveniently located at /etc/squid/
acl im port 1863 5190 5050 5222 6667
http_access allow im
A restart is needed to make the changes take effect ( sudo /etc/init.d/squid restart)
The ports listed on the acl im should be sufficient for AIM, Yahoo, GTalk, MSN, and IRC when using Pidgin as your IM client.