IE 7 and up are hard-coded to bypass the proxy when the host is “localhost”. When Fiddler is running, you can change localhost to “ipv4.fiddler” to trick your browser into talking to the Fiddler proxy as documented here.
Since manually changing the host every time I want to test an ASP.NET or Silverlight application is so tedious, I wrote this little bookmarklet to do that work for me:
Paste that (as a single line) into the URL box of a favorite in IE and you’re one click away from tracing the requests between your browser and your local development web server.
I’ve been doing a lot of Silverlight work recently so have found this especially useful to debug the interactions between the client and the server.