It Encrypts/anonymize your traffic from your device to the internet.
When using a VPN your traffic encrypted from your device to your VPN Provider then heads out to the internet.
I always read very confusing descriptions of VPNs when i first started in IT but that is the basics of a VPN. So lets delve a little deeper.
I personally use and recommend Private Internet Access for a VPN.
https://www.privateinternetaccess.com/pages/buy-vpn/ (Disclaimer I get a commission from the PIA links on this page if you decide to pay for it)
Why would you want a VPN?
Since all your traffic leaving your device is encrypted to a VPN server that you trust you wont have people/business/government spying your traffic. Even other computers on your network, routers and ISP’s can’t see what your traffic is because it is encrypted and just looks like random noise.
You can use VPNs to also get around location restrictions. Say if you want to appear your from the USA you can choose a VPN server in the USA and access USA internet services.
There are plenty of good VPN’s, proxies, or TOR.
Want a Private Internet Access Setup guide? Head here http://www.techgeek.biz/techtips/how-to-setup-private-internet-access-vpn-quickly/
Tor is FREE to start with
and is like a VPN services where you bounce your traffic through a number of different nodes (servers), at the same time encrypting with a differently each time going through each node (server).
As well as this it changes nodes every 10 minutes. My biggest issue with Tor is… do you trust the last node? Where your traffic is decrypted and at the final stage? Defiantly worth a look at if its your type of thing.
If you are going to use tor I
I recommend using HTTPS everywhere extension for your browser. Thank you to the EFF (Electronic Frontier Foundation) for this extension and just general thank you to all the work they do.
This extension checks to see what is the highest security of each website and uses it to connect. Rather then the default using the lowest security.
Further about reading
Great Project and worthy of a donation if you have spare cash.