A proxy is a middleman: your program talks to the address, and the address talks to the site. The site sees the address, not your connection.
Two ports, two protocols
The same address answers on HTTP (port 20001) and SOCKS5 (20481). HTTP serves browsers and programs that accept an HTTP proxy; SOCKS5 carries any TCP traffic, including programs that do not speak HTTP.
What it does not do
It does not encrypt what passes through: for end-to-end secrecy, pair the proxy with HTTPS. A VPN is another thing: it protects the whole connection of the machine.