Internet Explorer Self configures off a host in your network

Many people are not aware that all someone has to do is setup a host on your network named WPAD, and put a proxy autoconfig, and boom your browsers start routing through the rogue proxy server. Or atleast that is how this all reads:

Create/install/implement a DNS record so that wpad.your.domain.name resolves to the host above where you have a functioning auto config script running. You should now be able to use http://wpad.your.domain.name/wpad.dat as the Auto Config Script location

http://www.squid-cache.org/Doc/FAQ/FAQ-5.html

Regardless, we setup a hostname that resolves to localhost to prevent someone from taking advantage of it internally.