With a proxy, you're trusting your stuff to a third party. Don't send any private information via a proxy unless you know what you're doing. HTTPS streams should be ok though (since they encrypt the end-to-end connection).
The proxy you are trying to use may well be a SOCKS proxy. Make sure you enter it in that text box, and not the box for (example) the HTTP proxy.
On Windows, use the proxy system in Firefox (which handles proxies on its own), or go into control panel, internet settings, and change it there. The latter place is what the system will use, including internet explorer.