There are lots of reasons that people want to hide their IP address when using the internet. When you are surfing the web, sending emails or just chatting with some online friends, the IP address of your computer is yoru identity online. It is this IP address that can be linked to you as an individual, your ISP holds information in their logs of everything you do online, it's all in a their logs and always linked to your own IP address.
When you visit a web site, virtually any web site then your IP address is recorded in their logs. This is the main reason people often use anonymous proxies, by directing your surfing through a proxy - the IP address of the server is logged instead of your own PC. This gives some sort of anonymity and protection against loggin on the websites you visit.
Of course it is rarely that simple, the trade off is that the proxy server you use has logs which record your web browsing. The commercial security proxy services delete these logs almost instantly, but who knows what happens to the logs on free anonymous proxies. It is essential you exercise extreme caution when using a free proxy service, many are legitimate but an awful lot of them are run by hackers and idenity thieves.
For people who hide their IP address for privacy reasons, they are in fact missing the point really. An anonymous proxy does hide your IP address from the web site you visit, but it does nothing to protect your identity from the logs at your ISP. These are the real security risk, the ISP has the potential to produce exact lists of absolutely everything you do online. This is why Governments use this information when investigating crimes, why go round the inidividual web sites when everything you need is in one place.
If a company is investigating copyright infringement any ISP can easily produce a list of P2p users, or everyone who has downloaded a certain file. The worrying bit is that this information is easily access, in the USA you'll need a warrant to access your home PC, but you don't to seize a full copy of your Internet activities for the last couple of years directly from your ISP.
If you want to know how you can hide your IP address and web browsing from everyone (including your ISP). You need anonymous software but this can also do lots of other great stuff I even watch my favourite shows from Hulu Canada with it.
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