CloudFlare is a Content Delivery Network, DNS management tool, HTTP proxy and provides DDoS mitigation. The idea behind CloudFlare is to provide a faster and more secure web free of charge.
A content delivery network does what it says in the name, it delivers content. The difference between delivering content from your origin server and delivering it through a CDN can be quite significant for performance. CDN’s deliver content from the closest data center to the initial request that the user makes. After one request is made to your origin server to fetch the files (e.g. images), CloudFlare then caches the files, optimises the files and stores it on their data center network so that the files decrease in load times and in some cases file size.
You can see the list of CloudFlare data centers here.
A HTTP proxy sits between your origin server and the users request to forward the request to your origin server. This can mask your origin servers IP address to prevent attackers from directly attacking your origin server.
CloudFlare sits between your origin server and the users request to provide additional security features (e.g. Web Application Firewall), block particular IP addresses or regions, and to improve general request performance (response times).