How it works is simple... the "Proxy" does the web surfing for you and then returns you requested page. It is an old techniques that has been around since dial up and was use by ISP's to "speed-up" web surfing. So... If you are surfing through a proxy in another country, then the feds will resolve there IP packet trace to that server... not the IP address given to you by your ISP...
Imagine a scenario like this
You wife (your PC) tell you (the Proxy Server) to get milk and eggs(The web site) on the way home from your hard day as a cop... YOU (the proxy) go to the store and get it, then deliver it to her... In her mind she has just done the grocery shopping because she, in fact, has a new gallon of milk and a loaf of bread... by proxy...
Furthermore, this plan can be foiled once "them boys" are on to what you are doing... Simply put... Having a "lookout" at the grocery store to follow you home...
HOWEVER, If it does get to the point that they (You and your Federal friends) care enough to really know your Home IP Address... chances are they have already inventoried your PC before they knock on your door and take you both...
and thats... the rest of the story...