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I have read this question on how a proxy works. But I want to know why do we need another extra layer called proxy at the first place? Is it because of any security reasons? If yes, then how does this approach solve the security issue?

P.S : I am talking about proxy servers that can be configured through browsers for browsing the internet.

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up vote 2 down vote accepted

There are a few reasons:

  • Proxies have the effect of changing your IP address. This allows you to hide your real IP address from the site you're connecting to, which can have various advantages (you can pretend to be from somewhere else when accessing geographically-limited sites, you can evade a block of your IP address, etc.) You can also combine it with ssh and take advantage of IP-based authentication. (Some proxies use the X-Forwarded-For header, which relays the originating IP, but not all of them do this. ssh-based ones never do.)
  • Proxies can really improve privacy when combined with encryption. That prevents anyone on your network from seeing what sites you're browsing to (because all requests go to the proxy), not just what content you're getting.
  • Proxies allow you to circumvent network blocks of websites, because you don't send requests directly to the blocked sites.
  • Proxy servers can cache requests. Browsers do this as well, reducing individual bandwidth usage, but if 100 people on a local network request a website, it still needs to be retrieved 100 times from the Internet. If they all use a proxy server, it only needs to be retrieved once, because the proxy caches the result and then sends this to all the clients. This takes much less bandwidth.
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what do you mean by geographically limited sites ? –  Geek Jan 22 '13 at 19:37
    
For example, some sites won't allow connections from outside the US. –  cpast Jan 22 '13 at 19:39
    
can you please explain the third point ... –  Geek Jan 22 '13 at 19:41
    
Think "your office blocks Facebook". –  cpast Jan 22 '13 at 19:44
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