Proxy is the server which get requests from clients and send it to other servers.
ULFS contain multiple specialized proxy servers: tor, plipo and squid.
Also SSH can be used as Proxy server (SOCKS5).
Proxies can cache requests and transfered data. Proxies can be used to monitor user activity and to reduce traffic consumption.
Proxies can provide internet-connection to computers in isolated networks an even to computers without network interfaces. Some virtual machines on QEMU with FlexVDI SPICE can use proxies on client to get client's Internet connection.
Some networks don't provide access to DNS therefore DNS should be used over proxy.