Ah- K. That's pretty much what I figured, but I've never heard the term before.
You're conspiracy theory conclusion #1 is a little off though- in that the only way to use ebay is with their internal proxy bidding system. Yes you are forced to, period. Whether you snipe it manually, use a service like AS, put in your max bid four days early and wait or sit there putting in a new bid every time someone outbids you, you are still entering a number for ebay to bid up to on your behalf, even if it's only enough to hit the next bid incriment. It may take days, or half a second, but that's how proxy bidding works. If you are winning (or losing) ebay auctions, then you are using their internal proxy bidding system- there's no way around it. I fail to see why it's goofy... how it could be improved?