In IE if you go to Tools, Internet Options, then the Connections tab then choose "Lan Settings" you will probably find you have it set to automatically detect settings.
It is unlikely if you are at home that you have a proxy server (unless it is with your ISP) but in a corporate enviroment they are more common. A proxy is a server via which many machines make requests - in this case a web proxy. They can be useful in that if, for example, everyone in an office goes to the same web page, the proxy can 'cache' that web page and therefore deliver it to your machine over a local network without every machine having to go away to get another copy. With such dynamic web content I'm not sure how useful they are for this purpose these days, but if for example you downloaded a large file and your proxy server held a copy of it - then it would be of use if someone else tried to do the same. If that makes sense!?