In some cases, they can even see inside your encrypted traffic as they relay it to your banking site or to ecommerce stores. They can see your traffic as it passes through their server.
The provider knows both who you are and what you browse on the Internet. Simple proxy providers also create a single point of failure. Some simple proxy providers use SSL to secure your connection to them, which protects you against local eavesdroppers, such as those at a cafe with free wifi Internet. Simple proxy providers are fine solutions if you do not want protections for your privacy and anonymity online and you trust the provider to not do bad things. You just have to point your browser at their proxy server. In the simplest configuration, you don't have to install anything. The provider may charge for use of the proxy, or fund their costs through advertisements on the server. The users all enter and leave through the same server.
This creates a simple, easy to maintain architecture. A typical proxy provider sets up a server somewhere on the Internet and allows you to use it to relay your traffic.
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