It is always possible to be outbid until eBay officially closes the auction. EBay does not have a policy of holding an auction open until all bids placed have been processed. When the eBay clock, which is in sync with the Naval Observatory or some other atomic timekeeper, says "time's up," bingo! Auction's closed. Unprocessed or partially processed bids go by the wayside. That's why we increase our lead times during periods of great eBay activity, like Sunday PMs. Gives eBay's servers more of a chance to process our snipes.
Rsmiller40 wrote, "The proxy would be played out, I believe ahead of the snip as it would take priority if it was a higher #." Absolutely. The comparison process is undoubtedly a major part of eBay's bid-screening procedure. But that process stops, too, when the atomic clock says "Time, gentlemen, please!" At that point, eBay looks at the highest bid processed to date, including proxy bids, and declares a winner.