Tor (The Onion Router) is a very sophisticated network of proxy servers.
When you are using Tor to access a Web site, your communications are randomly routed through a network of independent, volunteer proxies. All the traffic between Tor servers (or relays) is encrypted, and each of the relays knows only the IP address of two other relays -- the one immediately previous to it and the one immediately after it in the chain.
This makes it very difficult for:
To connect to the Internet through the Tor network and use it for anonymity and circumvention, you need to install the Tor client software on your computer. (It is also possible to run a portable version of the program from a memory stick or other external device.)
Tor is compatible with most versions of Windows, Mac OS X and GNU/Linux.
Tor uses a SOCKS proxy interface to connect to applications, so any application that supports SOCKS (versions 4, 4a and 5) can be anonymized using Tor, including:
If you installed Tor from the Tor Bundle, Browser Bundle or IM Browser Bundle, Tor also configured an http application proxy as a frontend to the Tor network. This will allow some applications that do not support SOCKS to work with Tor.
If you are mostly interested in using Tor for Web surfing and chatting, you may find it easiest to use the Tor Browser Bundle or the Tor IM Browser Bundle which will provide you with ready-to-use pre-configured solutions. The Tor browser bundle also includes Torbutton, which improves privacy protection when using Tor with a Web browser. Both versions of Tor can be downloaded at http://www.torproject.org/torbrowser/index.html.en.
Tor can be a very effective tool for circumvention and protecting your identity. Tor's encryption hides the contents of your communications from your local network operator, and conceals whom you are communicating with or what Web sites you're viewing. When used properly, it provides significantly stronger anonymity protection than a single proxy.
1. Tor does not protect you if you do not use it correctly. Read the list of warnings here: http://www.torproject.org/download.html.en#Warning, and then make sure to follow the instructions for your platform carefully: http://www.torproject.org/documentation.html.en#RunningTor
2. Even if you configure and use Tor correctly, there are still potential attacks that could compromise Tor's ability to protect you: https://wiki.torproject.org/noreply/TheOnionRouter/TorFAQ#RemainingAttacks
3. No anonymity system is perfect these days, and Tor is no exception: you should not rely solely on the current Tor network if you really need strong anonymity.