Proxy ARP allows a router to respond to ARP requests on behalf of hosts in another network — enabling hosts to communicate without knowing the destination is on a different subnet.
Proxy ARP is a security concern — a malicious device can proxy ARP for any IP, redirecting traffic (ARP spoofing via Proxy ARP). Disable Proxy ARP on router interfaces where it's not needed. Modern networks with proper subnet routing don't require Proxy ARP.