Have a look at
http://homepage.ntlworld.com/robin.d...trancache.html
As for what proxies do: Well, they actually store a copy of any websites you visit. The idea being that as the proxy is nearer the user (in network terms), so network access for popular sites SHOULD be faster.It also has an avantage for the ISP in that they only pay for the data to be transferred across their external links once (to the proxy), so it does work out slightly cheaper for them.
Proxies are only supposed to cache static file types (such as images, HTML pages etc). A properly configured Proxy should ignore dynamic files and pages (such as those on a forum).
TBH, I tend to have no proxy set, as I find all they seem to be is another thing that can go wrong.
BTW, the proxy IP will be different from your own IP. To a lot of websites, it will appear as if the proxy is actually browsing their site. With a minor code change, they can check your proper IP though.