Tor is a free application which is using for anonymous communication on the internet. Tor stands for The Onion Router. Tor Working with Onion routing technology. Onion routing is a technology for anonymous communication.
In this network all the users will work as a router. when you send a request to a server the Tor will encrypt the packet with many layers. Each Onion Routers removes a layer of encryption and send to another Onion Router. Tor also protect its users against traffic analysis attacks
So you can use Tor as a Anonymous Proxy, You can bypass firewall / proxy with Tor. Surf restricted sites with Tor. Go to www.torproject.org for more details.
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