One of our testers, Amos, posted his first blog post today and it goes a bit deeper into the TFS proxy than our msdn documentation so I thought that it might beneficial to cross reference since our Proxy is so popular in the marketplace.

Here is the link: http://blogs.msdn.com/tsyang/archive/2008/03/24/how-team-foundation-server-proxy-2008-works.aspx 

- mario