Proxy ARP

Proxy ARP is a technique by which a network router answers to arp request on behalf of another host effectively directs all trafic for that host to a proxy host. When the router captures the traffic it then routes it to the destination host.

Why use Proxy ARP?

Great advantage of proxy ARP technique is the greater control over IP connections between hosts. It does not disturb the routing tables of the other routers on the network. for that reasons Proxy ARP can be used to connect LANs over serial lines or to place a firewall without changing the network topology.
More information

Cisco Proxy ARP
Wikipedia Proxy ARP