Three simple questions, with fault tolerance so your system does not get screwed up, to turn on a system-wide SOCKS-proxy, and one question to turn off.
Runs on Mac OS X Leapard or higher
To turn on a system wide SOCKS proxy you will need a "service" already running in the background to bind SOCKS too. Here is SSH tunnel example bound to localhost directing traffic through port 8080
ssh -2 -C foobar@tunnel.com -p 22 -N -D localhost:8080 2>/dev/null
Once the service is running, use the tunnel address and port number in SystemProxy. Usig the above example, the information you would use is this:
Proxy Address: localhost or 127.0.0.1
Port Number: 8080
Once set, see your traffic in Safari being sent through the proxy. Since this test case is using a tunnel to a online service
Google: what is my ip
to see what IP Address is seen by online servers. Therefore, if you turn SOCKS off, you should than see a different result.