Proxy Server acts as a gateway to the Internet world for each client computer. Proxy server is invisible to the client computer: a user who interacts with the Internet via a proxy server will not know that a proxy server is handling requests are done. Web server that receives requests from the proxy server will interpret the request-the request as if the request came directly from the client computer, instead of the proxy server.
Proxy servers can also be used to secure private network that is connected to a public network (like internet). Proxy servers have more functionality than a router that features packet filtering because it is a proxy server to operate at a higher level and have a more comprehensive control of network access. Proxy server that functions as a "security agent" for a private network, commonly known as a firewall.
Source :http://id.wikipedia.org/wiki/Proxy_server
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