The last machine in the path then submits your request as if it were its own. When the answer comes back, the last machine acting as a proxy encrypts the Web page N times and sends it back through the same path to you. Each machine in the chain only knows the node before it and the node after it. Everything else is an encrypted mystery. This mystery protects you and the machine at the other end. You don't know the machine and the machine doesn't know you, but everyone along the chain just trusts the Tor network.
While the machine acting as your proxy at the other end of the path may not know you, it could still track the actions of the user. It may not know who you are, but it will know what data you're sending out onto the Web. Your requests for Web pages are completely decrypted by the time they get to the other end of the path because the final machine in the chain must be able to act as your proxy. Each of the N layers was stripped away until they're all gone. Your requests and the answers they bring are easy to read as they come by. For this reason, you might consider adding more encryption if you're using Tor to access personal information like email.
There are a number of ways to use Tor that range in complexity from compiling the code yourself to downloading a tool. One popular option is downloading the Torbutton Bundle, a modified version of Firefox with a plug-in that makes it possible to turn Tor on or off while using the browser; with it, using Tor is as simple as browsing the Web. If you need to access the Internet independently from Firefox, you may be able to get the proxy to work on its own.
Online privacy technique No. 3: SSL
One of the easiest mechanisms for protecting your content is the encrypted SSL connection. If you're interacting with a website with the prefix "https," the information you're exchanging is probably being encrypted with sophisticated algorithms. Many of the better email providers like Gmail will now encourage you to use an HTTPS connection for your privacy by switching your browser over to the more secure level if at all possible.
An SSL connection, if set up correctly, scrambles the data you post to a website and the data you get back. If you're reading or sending email, the SSL connection will hide your bits from prying eyes hiding in any of the computers or routers between you and the website. If you're going through a public Wi-Fi site, it makes sense to use SSL to stop the site or anyone using it from reading the bits you're sending back and forth.
SSL only protects the information as it travels between your computer and the distant website, but it doesn't control what the website does with it. If you're reading your email with your Web browser, the SSL encryption will block any router between your computer and the email website, but it won't stop anyone with access to the mail at the destination from reading it after it arrives. That's how your free Web email service can read your email to tailor the ads you'll see while protecting it from anyone else. The Web email service sees your email in the clear.
There are a number of complicated techniques for subverting SSL connections, such as poisoning the certificate authentication process, but most of them are beyond the average eavesdropper. If you're using a local coffee shop's Wi-Fi, SSL will probably stop the guy in the back room from reading what you're doing, but it may not block the most determined attacker.