Source : Free On-Line Dictionary of Computing

proxy ARP
     
        The technique in which one {host}, usually a {router}, answers
        {Address Resolution Protocol} (ARP) requests intended for
        another machine.  By "faking" its identity, the router accepts
        responsibility for routing packets to the "real" destination.
        Proxy ARP allows a site to use a single {IP address} with two
        physical networks.  {Subnet}ting would normally be a better
        solution.