A proxy basically hides your IP address and lets you surf through the IP address of the server. So, It basically hides your IP. It is believed that Jagex "flags" ip's and if you keep botting on them you are more likely to get banned. OSBot does currently support proxies (Standard is built into the client, but for mirror, you can use a program called proxifier).
Any other questions feel free to come into the chatbox and talk!
-Muffins