Proxy services change your IP address so that sites identify your location differently and proxy services add a layer of anonymity by hiding your IP address on the web sites you visit.
VPN Services change your IP address so that sites identify your location differently. They add a layer on anonymity by hiding your IP address on the sites you visit.. VPN services also encrypt the traffic between your location and the VPN service. This adds a layer of security over insecure networks. It also prevents your ISP from monitoring your activity since they can no longer see what sites you are visiting.
Note: The above two services are pay services. There are no FREE proxy or vpn services. Either you pay for the product or you ARE the product! (They sell the lists of sites you visit for marketing purposes)