By using a VPN to redirect traffic you are in fact setting up a proxy but it is unlike the usual methods employed to proxy traffic.
The advantage of a VPN compared to more common proxy methods is that it is more likely to work with the popular BitTorrent clients out there.
In case if illegal BitTorrent usage the owner of the public IP (now the gateway of the VPN server) is still susceptible to legal action. The added value of a VPN (or a proxy) is to generate an additional chain that authorities have to go through to get to the end-user. By using a VPN in a different nation this chain can become quite a barrier because the IP owner is protected by laws of that nation.
The disadvantage of a VPN is the added costs of bandwidth of the other machine (It is either expensive or severely limits speeds). Also most commercial VPN services don't (or maybe for a hefty price) offer the ability to forward a port which also has some negative effects on BitTorrent (including speeds).
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