Proxy server - 1

In computer networks, a proxy server is a server (a computer system or an application program) which services the requests of its clients by forwarding requests to other servers. A client connects to the proxy server, requesting some service, such as a file, connection, web page, or other resource, available from a different server. The proxy server provides the resource by connecting to the specified server and requesting the service on behalf of the client. A proxy server may optionally alter the client's request or the server's response, and sometimes it may serve the request without contacting the specified server.
A proxy server that passes all requests and replies unmodified is usually called a gateway or sometimes tunneling proxy.
A proxy server can be placed in the user's local computer or at specific key points between the user and the destination servers or the Internet.

Types and functions
Proxy servers implement one or more of the following functions:

Caching proxy server
A proxy server can service requests without contacting the specified server, by retrieving content saved from a previous request, made by the same client or even other clients. This is called caching. Caching proxies keep local copies of frequently requested resources, allowing large organizations and Internet Service Providers to significantly reduce their upstream bandwidth usage and cost, while significantly increasing performance.
There are well-defined rules for caching. Some poorly-implemented caching proxies have had downsides (e.g., an inability to use user authentication). Some problems are described in RFC 3143 (Known HTTP Proxy/Caching Problems).

Web proxy
A Web 2.0 style example,
Proxies that focus on WWW traffic are called web proxies. Many web proxies attempt to block offensive web content. Other web proxies reformat web pages for a specific purpose or audience (e.g., cell phones and PDAs for persons with disabilities).
Many organizations — including schools, corporations, and countries — use proxy servers to enforce acceptable network use policies (see content-control software) or to provide security, anti-malware, and caching services. A traditional web proxy is not transparent to the client application, which must be configured to use the proxy (manually or with a configuration script). In some cases, where alternative means of connection to the Internet are available (e.g., a SOCKS server or NAT connection), the user might be able to avoid policy control by simply resetting the client configuration and bypassing the proxy. Furthermore, administration of browser configuration can be a burden for network administrators.
Access control: Some proxy servers implement a logon requirement. In large organizations, authorized users must log on to gain access to the WWW. The organization can thereby track usage to individuals.
Web Proxies such as Vtunnel and Fast web proxy became well known when Google in the UK required all Gmail users to have a @googlemail.com email address rather than the standard @gmail.com address. The web proxies were used to bypass restrictions put on and allowed UK users to have the @gmail address.

Anonymizing proxy server:

A proxy server that removes identifying information from the client's requests for the purpose of anonymity is called an anonymizing proxy server or anonymizer.

Hostile proxy:

Proxies can also be installed by online criminals, in order to eavesdrop upon the dataflow between the client machine and the web. All accessed pages, as well as all forms submitted, can be captured and analyzed by the proxy operator. For this reason, passwords to online services (such as webmail and banking) should be changed if an unauthorized proxy is detected.

Intercepting proxy server

An intercepting proxy (often incorrectly called "transparent proxy") combines a proxy server with a Gateway. Connections made by client browsers through the gateway are redirected through the proxy without client-side configuration (or often knowledge).
Intercepting proxies are commonly used in businesses to prevent avoidance of acceptable use policy, and to ease administrative burden, since no client browser configuration is required.
It is often possible to detect the use of an intercepting proxy server by comparing the external IP address to the address seen by an external web server, or by examining the HTTP headers on the server side

Transparent and non-transparent proxy server:

The term "transparent proxy" is most often used incorrectly to mean "intercepting proxy" (because the client does not need to configure a proxy and cannot directly detect that its requests are being proxied).
However, RFC 2616 (Hypertext Transfer Protocol -- HTTP/1.1) offers different definitions:
"A 'transparent proxy' is a proxy that does not modify the request or response beyond what is required for proxy authentication and identification.
"A 'non-transparent proxy' is a proxy that modifies the request or response in order to provide some added service to the user agent, such as group annotation services, media type transformation, protocol reduction, or anonymity filtering."

continued in 2nd part