Proxy servers primarily prevent external users who identifying the IP addresses of an internal network. Without knowledge of the correct IP address, even the physical location of the network cannot be identified. Proxy servers can make a network virtually invisible to external users.
Routers can connect two or more network segments. These are intelligent network devices that store information in its routing table such as paths, hops and bottlenecks. With this info, they are able to determine the best path for data transfer. Routers operate at the OSI Network Layer.