Well if you have ever considered hiding your system from the internet then anonymous proxy are the first things that will pop-up that list.There are different types of proxy like content filtering,the one that can be used to share a single internet connection to many computers..blah blah & anonymous proxy which we will be talking about.
This is how it works,any information that flows through the anonymous proxy first, then reaches the destination,so this means the IP[32-bit address] address of the proxy machine gets logged where ever I go & not my IP address.This seems all Oober & make a everyday joe feel ultra cool at first but if you think logically then this is a stupid mistake.Agreed you arent stamping your authority everywhere you go when you log-in to the internet but what about the machine through which information is flowing[anonymous proxy machine] ? Can you trust that machine? Anyone with administrator priviledges on the machine can make a profile out of your internet activity,you ask how? Well since the information is flowing through that machine anybody with a decent amout of knowledge & proper tools[Ethereal] can sniff every single piece of information thats flowing & easily make a port folio of you for malicious purposes.
What more scares me is that there are more such free services available lying around the internet than any reputed paid service.Incase there are then please do let me know.But the practical aspect still remains the same for both.
What seems more amusing is why do people wanna hide? My point is if you got nothing to show then why worry about someone who has your IP address?