There are several ways to monetize a proxy website, there are the more primary strategies that can be implemented for example google adsense and the more secondary ways for example promoting a yahoo group.

The most common method i would say is Google adsense and other advertising programs uch as bidvertiser and adbrite the most commonly used is google adsense for its easy and simple to use optimizing options. This allows you to optimize/customise the adverts to suite the style/niche of your website.
So for proxy sites you may wish to use webhosting adverts or something aimed more at teenagers (being the main target market).

Other methods you can implement are adverising/promoting a proxy group for example on Yahoo or Google this could be your own group or one someone pays you to advertise. You add there invitation box and a small paragraph telling people why they should join and thats it.

You can sell links on your website, these could be text links or image links, dependent on how many you want to sell the money you can make here is rather good.

There are other ways but i would say these are the main ones, however remember do not just think about how to profit first hand from the site, taking the proxy group for an example, if you get people to sign up and then send them newsletters monthly and 10 people buy a product from your newsletter for $25 each then thats $250 from one site.

You can look here for more examples and also look out for a new proxy tutorial coming soon.

back-links.org

Those are the ways in how to monetize a proxy, the expenses are hosting which can be high if you do not shop around, as proxy sites eat up a lot of bandwidth generally in the Gigabytes. I would suggest either purchasing a server or a resellers acount (perhaps share with a friend).
The domain name will also cost you most people go for .infos as they are cheap however if your thinking about keeping a proxy site for a long time i would suggest using a .com its more expensive 5 fold however it looks more professional, and would often sell for more.
The design can be free as there are thousands of templates to use free to download, and do not take much to install, i am currently working on a video tutorial for installing three of the more common proxy scripts which will be available in August (busy with exams currently) this will help the less able people.
Other costs will be marketing and promoting however through research and reading on these forums and through the internet as a whole you can find whole bunch of great articles and tutorials on how to free or cheaply advertise the proxy site.

I personally do some excellent marketing and promoting for proxy sites $6 per site, which i have refined over the past 6 months and still doing. I use many techniques however i learnt how to do it through this site and overall the internet.
Perseverance(sp?) is the key, stick at it.
General most common advertising methods would be:
Signature Links on forum (both increase backlinks and traffic)
Submission to main search engines Google,MSN Yahoo (Long term impacts increase in stable traffic) do not bother submitting to other search engines many just reflect what these main search engines input.
Free Proxy List submission for example proxypromotions.com free and paid submission.
Yahoo and Google Groups, posting your proxy to these groups
Yahoo Answers


Hope this helps

- Amir
Good Luck.

Thats a great guide, will come in handy when advertising a few of my proxies.

You can also set up your own server and then run a closed proxy to surf with. We have running on our server hosted with Server Intellect. All ips are directed back to our server. So we have anonymous browsing. Very nice.