Proxy chaining is merely connecting to more than one proxy and then to your intended destination. You can use as many proxy servers as you can or want. The more you have, the more anonymous you will be.
By using proxy chaining you will work by this way:
your computer => proxy1 => proxy2 => ... => proxy X => web-site
When you use proxy chaining software, in fact you create one "virtual proxy". And when you want to use chain proxy1 => proxy2 => ... => proxy X you need to use address of created "virtual proxy". This address you will know when you set up your chain of proxies.
Resume: proxy chain is way of using several (2,3, 10, etc.) proxy servers similar as one proxy server.
Remember: it doesn't matter how many proxies you chain together, you will never be 100% anonymous.
Go back to proxy FAQ