A proxy server functions in network communications by acting as an intermediary between clients and the internet. It retrieves data from the internet on behalf of a user, providing several benefits like improved security, anonymity, and performance. By routing requests through a proxy, it can help obscure the user’s IP address, making online activities more private. Proxies also enable content filtering, which can restrict access to certain websites, and can cache frequently accessed content to speed up loading times. Overall, a proxy server enhances both user experience and network management.