three reasons why someone would setup a proxy server:
1. Monitor network traffic
2. Block web sites and setup access control lists
3. Conserve bandwith
There are other reasons why people use proxies but those are the 3 reasons why i setup one up at the small office I work for. I'll give you a brief explanation of how those 3 functions work.
First of all my proxy server is the gateway for the network. So the setup is as follows
DSL >> Proxy >> Switch >> LAN
In order to access the web all computers on the lan must pass through the proxy.
1) The proxy server logs all incoming and outgoing traffic. The logs are very detailed and can be helpful. They also let me track all of the inbound connections.
2) I setup a URL blacklist that will prevent office users from viewing certain websites (mostly porn, aim, and yahoo)
2) The proxy server I use lets me setup access control lists, this means that I can specify a type of user by IP address. All of the IPs in my office are static, which makes it easy for me to setup ACL's. I can say that my ip 192.168.x.x is an administrator ip, while someone else's ip is a user ip. Once I break the office ips down into users and administrators I can setup rules for each list. For example, you could configure your proxy to prevent users from downloading exe or zip files, while the administrators have full access to all online content. It's a nice feature to have if the people you work with have a habbit of clicking on pop up ads.
3) Finally, proxy servers conserve network bandwith because they cache content from the pages you view. Once the content is cached, the next time a network user browses to a web site the content is loaded from the proxy instead of from the remote web site. An easy example of this is google.com. The first time a user on the network goes to google the google image is loaded from google.com, the image is then cached on the proxy, so the next user to go to google will load the google logo from the proxy instead of google.com. This will make web browsing seem noticeable faster to network users, and it will conserve the bandwith the users used to use by retrieving content over the web.
Hope this message helps.