Definition: A proxy server acts as a middleman between your internal and external networks. It serves the dual roles of speeding up access to the Internet as well as providing a layer of protection for the internal network. Clients send Internet requests to the proxy server which in turn initiates communications with actual destination server.
By caching pages that have been previously requested, the proxy server speeds up performance by responding to future requests for the same page using the cached information rather than going to the web site again.
When using a proxy server external systems only see the IP address of the proxy server so the true identity of internal computers is hidden. The proxy server can also be configured with basic rules of what ports or IP addresses are or are not allowed to pass through which makes it a type of basic firewall.