Onion routing is a networking mechanism that ensures that the contents are encrypted during network transmission to the exit node and hides who is communicating with whom during the process. It is a general-purpose infrastructure for private communications over a public network. It provides anonymous connections that are strongly resistant to eavesdropping and traffic analysis between the network’s relays. However, exit nodes can monitor the traffic since they transmit the network packets to their destinations.
Onion routing is quite different from the other methods mentioned above. In basic terms, the connection from source A to destination B takes a detour along an encrypted chain called an onion. The network communication within the onion is also encrypted. Each node, known as a relay, only has the information about the adjacent nodes (the immediate sender and the next recipient). The complete picture of the communication chain is hidden, at least theoretically.
Censorship circumvention efforts mostly focus on what is observable by authorities in a network channel, intending to bypass them. Encrypted channels, which are created between each relay in onion routing, are therefore very effective. When the number of nodes increases, so does the complexity and number of encrypted channels. Compared to other circumvention methods like proxy or VPN, this is one reason behind the popularity of onion routing solutions. Tor is a prominent example of onion routing network implementation, but it is not the only one. I2P is a strong competitor for Tor, though not as popular. Freenet is another example. Using Tor together with proxies and VPNs makes it even more resistant.