If you can afford a few dollars per month for a Virtual Private Network (VPN) service, you should go with the VPN over the proxy server. While there are numerous types of specialized proxy servers, a VPN will hide your IP address from everybody, and encrypt all of your internet traffic – not just web traffic, or BitTorrent traffic for example.
Furthermore, VPN companies with global networks (like IPVanish) will actually allow you to log into a VPN server in a different country! For example, if you live in California, and log into the Netherlands VPN server, from that point on, every web server you go to will think that you are Dutchman, and may even give you web pages in the Dutch language! The next day, you can be British, or German!
When you are connected to a VPN, all that your ISP (and anybody else sniffing your packets) can see is a stream of encrypted data going to and from your VPN company. This makes it impossible for your ISP to “throttle” your BitTorrent and Usenet download speeds – if your ISP has a “traffic shaping” policy.
In conclusion, if you have limited needs, you can get by with a proxy. But if you are a power-user, you will soon come to see a VPN as indispensable.