An alternative simplified explanation:
Proxy tables are a way to make a table on a completely different server appear to users as if it were a local table. When a user uses a proxy table in a query, ASE opens a connection to the remote server, selects the necessary remote data, and then uses that data locally to complete the query. Proxy tables can also be created against a remote procedure so that the output of the procedure can be accessed like a table, or created against local file so that the file contents can be accessed like a table.
-bret
