Organizations with a firewall between their users and the Internet can allow the users connect to the Internet either via low-level IP proxy or via application proxy. The IP proxy service is invisible to the programs running across it; application proxy service requires that the application used across the firewall specifically support application-level proxying for the protocol (like HTTP or FTP) that you wish to proxy.
Which one is used depends on the capabilities of the firewall (not all support both), the application software (which may or may not support application-level proxies) and organizational policy.
Popular browsers like Internet Explorer and many FTP clients include support for application proxying. So, if you only need browser and file transfer capability, application proxy service is all you need. However, if you need to punch a hole through a firewall to run a special-purpose proprietary program like a custom database application, youll probably find that youll need to set up IP proxy service, as application level proxy is unlikely to be supported by the custom application.
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