A  recent  email from Greg Block put this oh so nicely.  So here it is
verbatim.

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From: Winter@oubliette.COM (Greg Block)
Subject: Re: AMosaic 1.3b

> Now what is proxy?

For  many  reasons,  some  networks  choose  to  run the CERN httpd program in
"proxy"  mode; basically, that means that instead of your program fetching the
HTML  directly,  it  proxies  the request to the httpd that is set up in proxy
mode.   It  asks  the  httpd  to  get  the file FOR it.  The httpd then either
proxies  or  fetches,  depending on how it is configured, and returns with the
page.

Sometimes, it is done because of a firewall, preventing the local network from
outside  access.   Many  times,  however,  it is done simply because httpd can
create  a "global cache" of all files that it grabs; creating a cache that all
of  the  users in the local network share, rather than one local to a specific
user.

Dat answer da question?  Someone make this FAQ.  :)

Greg
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Thanks Greg