A proxy server is a kind of buffer between your computer and the Internet resources you're accessing. The data you request come to the proxy first, and only then it transmits the data to you.

A proxy server receives a request for an Internet service (such as a Web page request) from a user. If it passes filtering requirements, the proxy server, assuming it is also a cache server, looks in its local cache of previously downloaded Web pages. If it finds the page, it returns it to the user without needing to forward the request to the Internet. If the page is not in the cache, the proxy server, acting as a client on behalf of the user, uses one of its own IP addresses to request the page from the server out on the Internet. When the page is returned, the proxy server relates it to the original request and forwards it on to the user.

To the user, the proxy server is invisible; all Internet requests and returned responses appear to be directly communicated with the addressed Internet server. (The proxy is not quite invisible; its IP address has to be specified as a configuration option to the browser or other protocol program.)

What is Transparent, Anonymous or Elite proxy?

* Transparent proxy - A transparent proxy announces to the world that it's a proxy, and passes on your information. It provides no privacy improvements.

* Anonymous proxy - An anonymous proxy offers the caching benefits of a transparent proxy, while hiding your IP address (by replacing with either the proxies IP, or a random address. The downside to this approach is that sites that use address detection to establish unique users (online games, voting, some logins) will not be able to distinguish you from others in your domain. Of course, that might be a bonus sometimes.

* Elite proxy - A highly anonymous (often known as an elite proxy) makes your system look the same as a non-proxy system (with the proxy servers IP address). This provides the best security. There's no way to detect an elite proxy