My grade school was grades 1-8 (Catholic school). We had a square dancing unit in gym every year. At the end of the unit, they would have a big square-dancing party at the school (for students and their families). It was usually in the fall and they had hot dogs, caramel apples, etc. I didn't especially look forward to the gym class, but the square-dance party was pretty fun.
My kids had a dance unit in Elementary School but I believe they learned a school-appropriate hip-hop routine, not square dancing.
Edited to add: I thought it was taught for exercise and to give those of us who are not athletically inclined a chance to do something that we didn't suck at. Everyone can square dance. In my school you could literally see the eye rolls and sighing of the team captain who got stuck with me for basketball... but I could do the square dancing unit just fine. (And let's just say not all 4th graders are cut out for hip-hop dancing! There are some who can't do it at all, and some who do it TOO well.)