In a nutshell, when your computer sends a "message" over the internet, that message goes to a computer at your ISP. The message has a "header" that says, "I'm this address, I'm trying to send it to that address." The ISP computer tries to find that address or, if it can't, it tries to find one it knows that's a little closer, and the process repeats. Every computer that gets this message has a chance to read it, store it, etc.

Proxy: a tiny bit of security against snooping

A "proxy" is a machine you tell your computer to ALWAYS send the message to first. This changes the way the "header" works a little bit. You send to the proxy "I'm this address, I want to send to that address". But when the proxy get it, it changes it to "I'm <the proxy address>, I want to send to that address". The message goes to other computers, and when it comes back to the proxy, the proxy rejiggers the message so it goes to you. This adds a bit of privacy, as everything past the proxy only knows the proxy sent the message. Note that your ISP is still between you and the Proxy, so there are still some computers that get a chance to see the message and/or record it.

VPN: a lot of things, but also more security against snooping

A VPN can be a lot of things, but right now we're interested in how it's sort of like a proxy. Normally for computers to talk directly to each other they need to be (oversimplified) connected to the same network, and "same network" here is a very restrictive concept. A VPN is a way to break the rules and treat a lot of "not connected" computers as if they were on the same network.

But in the context I'm smelling, you're also interested in "VPN tunnels". Oversimplified, a VPN using this feature ALWAYS demands that the traffic between you and the VPN is encrypted. So while you're still using your ISP's computers to transfer data, now all the ISP sees is "Oh, this is an encrypted message to a VPN. Think of it kind of like if you don't want people to know who you send a message to, you put the "real" envelope inside another envelope and mail it to someone else you trust. So it's LIKE a proxy, only now it hides the part BEFORE the proxy from anyone who can intercept it there. (Whether it's encrypted AFTER the VPN is up to whoever you're connecting to.)

Torrents: a file sharing protocol that's a completely different topic

One problem with downloading big files from a server is those servers might be unreliable. If it goes down, the download stops, and generally it's not easy to find another server or convince that other server to resume where you left off. This is especially true when doing "peer to peer" downloads, where the "server" is other peoples' machines which can be frequently losing connections or slow.

Torrents split files into lots of small "chunks" and everybody who has a complete chunk might be a "server" when you are downloading. If 100 people have the "chunk" you need, you can get it from the fastest one and keep doing that over and over. If 50 people lose their connection, you might not even notice and at worst you only lose 50 "chunks" of progress. This tends to lead to faster, more reliable downloads as long as people don't intentionally cut off uploads.

Probably what you meant to ask:

Torrents are amoral. They can be used to distribute legitimate files AND they can be used to distribute files that could get you in trouble whether or not we agree they should get you in trouble.

If you use a proxy to download torrents, your ISP could still potentially know you're downloading a file and, if they do some digging, what files you're downloading from who. That is bad news if you're doing things that could get you in trouble, and in some cases the ISP is obligated to report you or else they will get in trouble.

If you use a VPN, the ISP only knows you're receiving a lot of data through a VPN. Maybe they're suspicious it's something that could get you in trouble, but it could ALSO be something legitimate and they have no way to tell. The VPN company could, perhaps, do some snooping. But it's very bad for their business to do that, so many VPNs base themselves in countries where they are not obligated to do this snooping and promise they'll never do it.

This tech is, again, amoral. You can use it to hurt people while remaining anonymous. That's why a lot of people want to make it illegal. But that line of thinking is flawed, because sometimes there are very good reasons to want to be anonymous even when you aren't hurting people. I highly doubt people who say "I have nothing to hide" would be excited about a law that requires they shout their name and address while using a public restroom. "That's not the same", they'd say, but I don't find they can usually provide a good explanation why it's different. Please don't do things that hurt people with this knowledge and make those people feel more right.