Proxy ARP: It is utilizing a router to answer ARP requests. It will be done whenever the originating host believes that the destination is local, whenever in fact is lies away from router.
Proxy ARP (abbreviated as Address Resolution Protocol) is a method by which a device on a specified network answers the ARP queries for a network address which is not on that network. The ARP Proxy is conscious of the position of the traffic's destination, and provides its personal MAC address in response, efficiently saying, "Send it to me, and I will obtain it to where it requires going." Serving as the ARP Proxy for other host efficiently directs LAN traffic to Proxy. The "captured" traffic is then usually routed by the Proxy to the planned destination via other interface
The main benefit of proxy ARP is that it can be added up to a single router on a network and do not disturb the routing tables of other routers on the network.