A proxy server is basically an intermediate server handling communications between two points, Usually, in most corporate network environments, a proxy server usually resides between your computer and any destination on the Internet..
SDM's default proxy settings (borrowing them from your Control Panel - Internet Options (IE browser options) will work with most network environments.
If the SDM default settings do not work on your network, please consult with your network administrator on what SDM should use as proxy settings and enter them by selecting Tools - Proxy Options from the SDM main menu.
Please note that it is extremely unlikely that setting the SDM Proxy to "Direct connection to the Internet" will work in a corporate network environment and either "Use Proxy Settings from Microsoft Internet Explorer" or "Use Custom Settings" are recommended.
Also note that if you are using a notebook and using several different networks, proxy settings will likely change as you move from network to network and you might need to change the SDM proxy settings accordingly.