TOR in the news
Since TOR had a bit of press coverage with the Anonym.OS Release and the EFF statement about Google's resistance to government subpoena I think the prime time for TOR is slowly approaching.
TOR is an application which enables the user to anonymize the IP traffic to and from his computer. This is done by providing an SOCKS proxy on the clients side which receives the IP packets, encrypts them and sends them to several TOR servers on the internet via HTTPS. Those servers then exchange the requests a few time until one finally decrypts the packet and sends it into the internet. It also receives the internet-reply, encodes it again and delivers the result back to the client again using the TOR servers.
This way everything which can be seen going in and out at a client are some encryptet HTTPS connections to a handful of servers in the internet.
The advantage of using HTTPS is that it's widely used for secure websites and so the traffic is more difficult to recognize for an outside attacker or surveyor. It also allows to bypass certain restrictions for example if a company or state blocks specific websites for its employees or inhabitants.