A proxy server is one that sits between the real server and the client. It interrupts requests to real servers to check whether it can fulfill the requester's demands itself on the proxy servers machine. If the proxy server cannot take care of the request it forwards it to the real server. For instance, a user my use his browser to request a web page. The proxy server will check whether the page exists in the cache and if it can be served. If this is not possible, the request is forwarded to the real server.
Proxy servers therefore allow access to web servers in an indirect way. Your identifying information like location and type of browser and also your IP address can be kept or passed on to the real server. Such proxy servers, used specifically for removing identifying information in requests from clients, for maintaining anonymity are referred to as anonymous proxy server. Although you can get some of them for free, you will always pay a cost for better and reliable services.
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It could be what you have in your mind is to hide your IP address, but you can achieve even better anonymity through proxy servers. For example, you can achieve a great degree of separation from the end server through proxy server chaining. This will ensure that people on the server find it hard to track you down. The close each hop gets nearer to you, your information gets more exposed and the greater the chances of getting traced.
Original encryption of data will also guarantee you greater level of protection. A proxy server may be able to encrypt data received before passing it on. However, unencrypted data received by the proxy server that does not encrypt data in normally very vulnerable. Majority of those free proxy servers that are anonymous do not encrypt data. Most encrypting proxy servers come at a cost but are worth it.
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Multiple proxy servers are able to offer extra online privacy as they have an extra protective layer. Websites accessed through convectional proxy servers will only cache data about proxy servers and not explicit internet connections. Sometimes users are forced create new servers due to overloading. The most appropriate solution to this problem is multiple proxy servers. In this type of servers, the system will automatically jump to another server once the first one is not available.
It is also worth noting that proxy servers do not offer you protection from someone with direct access to your computer. It is possible that they may snoop on your activities. When you are in such a situation, always remember to take protective measures such as deleting and clearing web search history, cookies and cache from your toolbars and web browser.