Yes, “proxy” is another term that has some ambiguous colloquial meanings when you encounter it in conversation, although its intended Blender meaning is fairly specific.
When you add a link, it refers to another file by name, and Blender literally opens that file to retrieve the requested data from it. It uses the data “as it is, where it is.” This is why, when the source-file is updated for any reason, the change will immediately be visible everywhere: because there is one source for this data, namely the (only) file in which it appears. So, there’s “only one source of Truth.”
Proxies, then, are a practical way to handle the “local, per-file” differences … the linked object’s location “here,” or animations and so-forth that are to take place “here,” and so on. The way that it works is that certain information attached to the proxy, and stored in the file in which the proxy appears, supplements or supersedes the information that’s drawn from the library file (according to rules that the library-file owner can dictate).