You will need the following
1/ VPS hosting (with SSH Access) recommended is hostingboy.net
2/ File sharing software, we will be using Vuse for this tutorial
3/ Putty, available from putty.org

Instructions
By now you VPS Hosting should be setup and you need to create a tunnel from your computer to your VPS server.
Load up putty.
The first screen you are going to see is call the Session screen.
Under Host Name type in the domain name or if you ordered a dedicated IP address use that.
The other settings are default. The port is 22 and the connection type is SSH.

Now you need to change the category, so click the + sign beside SSH.
Select tunnel and in source port type 1080 then click add.
Thats it, click open and type in your username and password!
Once connected,leave putty open as this keeps your tunnel open.

File Sharing Setup
Now open Vuse.
Click tools and options.
Under connection click the + sign.
Now click proxy options.
Make sure all boxes are ticked.
Set Host to 127.0.0.1
Set Port to 1080

Using the proxy to surf
If you would also like to use the proxy to surf the internet anonymously then download Firefox from mozilla.com
Once installed click tools and options.
You need Advanced and network selected.
Were it says "configure how firefox connects to the internet" you will need to click settings.
Change SOCKS Host to localhost and set the port to 1080
Select SOCKS v5 and click ok
Your done!