Lets say I use phpProxy script to run a free proxy site with adsense/adbrite on it. What kind of server/hosting would it need if the proxy grows really big and high traffic volume? Are these proxy scripts/sites heavy on the cpu load? Does it require a Dedicated server?
Depends. most kids these days who start a proxy, they move to a VPS fairly quickly due to the amount of traffic. Also consider the legal risk for running one of these proxies... It really depends on how much traffic you get, a friend of mine had a few proxies running and he required 2 servers - 4 proxy domains, not sure on hits. however he was on proxy topsites...
You need proxy web hosting. That is separate kind of web hosting and I would recommend you have a look at http://santrex.net/proxyhosting.php for proxy web hosting.
It's a bit iffy. Technically, the service being provided (allowing the user to surf anonymously) is legal. The thing is that it can be used to do things that are illegal in some cases. Having a Terms of Service document on the website could be handy.
but as far as what you need for specs in hosting, it's hard to say. If it's a newer proxy i'm sure you could get away with things for a while on a decent shared server but they are resource intensive sites eventually leading you to a VPS or dedicated server fairly quickly
in the beginning you can use simple hosting until you get to much load on the server then you can go to vps or dedicated server
The specs, plus CentOS, sounds like a good option, though I'd recommend getting more lower-powered servers than 1 big one like this. Better yet, divide the load among different hosting providers. Proxies often come with a number of headaches for both the site owner and the hosting company due to the high chances of abuse (I've seen my share of this). In such a case, it's always better to have your eggs in different baskets and be prepared. Once your site becomes really heavy, even the Quad Xeon won't be enough to handle it. Having more boxes means you'll be able to scale better when the time comes. Lastly, proxies eventually get blocked by countries and universities. Having your site on different networks means there's a higher chance of users getting through to them. Hope that helps.
You need to make sure that the server you get, or vps or hosting allows proxys some data centers do not allow proxys on the servers even if it is dedicated. If you are just starting out then you will not need a dedicated server. Proxy web hosts are a must as the servers need to be optimized for proxys, as they do have higher cpu usage. If you have any more questions please contact us as we do offer proxy hosting.