Proxy is the “tech” behind it.

Essentially, a proxy does the same thing as any other web browser. If you type in an address, it will be directed to the specific page…unlike a traditional browsing experience however, the address is coded as part of the proxy site address and not the actual visited website. Second, this access to the site through the proxy will only appear as information related to the proxy, and not the website visited.

Hope this helps!

-Schmidtw

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This site has a discussion on how to block this application. there is some information there that might be of interest to you. This Microsoft site covers how to use software restriction policies in windows server 2003. The description here gives some details about proxy servers.
Good Luck
-Flame
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