Suicide Squid was a running injoke from rec.arts.comics. When a poster tried to ask what was going on in the DC comic Suicide Squad, they made a typo, and everyone jumped in to inform them of the events in the long-running completely-made-up Suicide Squid comic, starring a superhero cephalopod with the ability to die. The rec.arts.comics.* awards were named the Squiddies, with Suicide Squid's fan club becoming known as the Black Ink Irregulars. Eventually, an alt.fan.suicide-squid was created.
In the LNH specifically, Suicide Squid has shown up a few times, most notably as the being that empowered Squid Boy. He sacrificed himself (naturally) for SB's continued existence in the Looniverse as Squidman, but after Squidman killed Sig.Lad to save the world in X-Post Facto, the Squid was able to relay a message from the beyond that Sig.Lad understood and forgave him. Later on, Saxon Brenton wrote an issue of Legion of Net.Heroes Volume 2 flashing back to an untold tale of Suicide Squid.
Suicide Squid comics and merchandise also show up in the Looniverse, including the real-life Suicide Squid T-shirts created by Tom Galloway.