The arms are straight, and the bar lies in the fingers, like it is holding a hook. Thumb should be overlapping one or two of the first two fingers.
The bar should "not" be squeezed. Rather, it should just lay in the fingers/hand. Only the thumb should be flexed, or squeezed, not the hands, not the forearm. If this is done incorrectly, most likely, the bar on a very hard pull will slip out of the hands. Also if the hands are rotated as you grip the bar, it will most likely slip out as the weight pulls down, and pulls the rotated hands back to a straight up and down position. One does not have to have a strong grip to hold onto large amounts of weight. I have a very poor grip and grip strength and have never lost a deadlift, i.e. 716 at 165lbs.
From Advanced Powerlifting Techniques by Rickey Dale Crain