A proxy is a server you go through before going out on the internet, sort of like a prophylactic sometimes.
Alot of ISP's set up a proxy. Adelphia makes you go through a proxy server. They say it's a "caching" server, so they can cache the more popular websites and get them to people when the website is down (I don't really buy that though).
Some companies make all of their internet activity go through a secure proxy to hide IP addresses from would be attackers.