A proxy server is something between you and the internet. Squid proxy is an application that caches a website and makes it easier to reach that website again.
If your squid is configured with wrong settings there is a chance it doesnt even reach the internet. You can try to reinstall.
From the squid faq:
Why am I getting "Proxy Access Denied?"
You may need to set up the http_access option to allow requests from your IP addresses. Please see ../SquidAcl for information about that.
Alternately, you may have misconfigured one of your ACLs. Check the access.log and squid.conf files for clues.