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How a Proxy Server Works
When you do anything over a network, your computer has to know how to get its electronic bits to the other system. It does this via TCP/IP and a lot of help along the way. The system you are connecting to needs to know where to send its electronic bits to fulfill your request. It gets this information in the form of an IP address. An IP address is essentially the address of your computer on the Internet. Just like your home address, knowing it, means knowing something about who you are and where to find you. Some websites like to taunt you about this fact by saying something like, "Your IP address is 126.96.36.199 and you are in Timbucktwo, Alabama." I'm not sure what that is supposed to prove or why I should care, but there you go.
However, since knowing your IP address means having the potential to know something about you, there are instances where you might want to conceal your IP address from the systems you are talking too. One of the easiest ways to do this is through an open proxy server. The open proxy server works by taking all of the electronic bits from your computer (with the tale-tale IP address) and then sending them onto the system you want to communicate with. When it does this, it pretends that it is the one doing the asking and so, the remote system replies to the proxy server and its IP address and not yours. This wouldn't do you much good because you would never get the information you wanted, except then, the open proxy server turns around and sends those electronic bits back to you.
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How to Use a Proxy Server
There are two ways to use an open proxy server. The most common way is through a web interface in which you enter the web address of the site you want to visit instead of entering it in your own browser. So, if you wanted to go to www.ibm.com, instead of typing www.ibm.com where you normally would in your Internet Explorer or Firefox browser (or others) you would type www.<open-proxy-server-site>.com. The page that will open is the proxy page. On that page you type into a form the address: www.ibm.com and the proxy server takes it from there.
As you can imagine, this could be quite tiresome if you had to do this for every site you wanted to visit. To this end, the typical open proxy server hijacks all of your clicks such that when you are on ibm.com and you click a link to www.unitedway.com the proxy server takes that traffic as well.
You terminate the proxy's functionality by typing an address manually into your browser like you normally would, or by closing that window and opening a new one. Keep in mind that if you use tabbed browsing, the proxy server typically only works in the tab in which it was opened, so you are not getting an anonymous IP address in your other tabs.
The other way to use an open proxy server is to enter the address of the proxy server in one or more of your programs (or in your network configuration). In this way, you never have to visit an extra website, and your traffic is protected even if you close a window and open a new one or if you are using multiple tabs. Many open proxy servers will charge you a fee to use the proxy in this way because it will generate much higher traffic. On the flip side, your traffic will always be anonymized.
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The catch is that your traffic is now making a stop. Just like a non-stop flight is faster than a flight with one stop, non-stop network traffic is faster than one-stop traffic. The way bandwidth works these days, you probably shouldn't notice unless you are doing something with a lot of overhead because the link between the proxy servers and the rest of the Internet will be much faster than the link between your home and the Internet. This may not hold true at some workplaces with fast connections or if for some reason you have dedicated fiber coming into your home.
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Where Do I Find a Proxy Server
There are dozens (hundreds?) of open proxy servers out there. Some are free, some have fees, some are restricted to certain users, others are willing to server anyone. Check out the Top 5 Free Proxy Servers for Online Privacy to start.