A proxy server can be either a computer system or a software application. Essentially it can retrieve data for the user as an go-between device and provide some anonymity.
1.1 A proxy server is a server that you can route your Web browser through, which fetches the content first then passes to you, in order to increase speed. It can also be used as a way to direct website traffic to a specific IP address or server, allowing you to test your websites on your new Webair server before making it live.
1.2 A proxy server is computer that functions as an intermediary between a web browser (such as Internet Explorer) and the Internet. Proxy servers help improve web performance by storing a copy of frequently used webpages. When a browser requests a webpage stored in the proxy server’s collection (its cache), it is provided by the proxy server, which is faster than going to the web. Proxy servers also help improve security by filtering out some web content and malicious software. http://windows.microsoft.com/en-US/windows-vista/What-is-a-proxy-server
This can sometimes be easier to use than a hosts file in order to test your websites.