Greatly influenced by http://przemoc.net/tips/linux#making_socks_proxy_transparent
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Install iptables-persistent, and libevent
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Execute ./configure.sh and follow the steps.
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If you can use firefox without filling in the proxy information then you should add ./iptables.sh to your startup programs. See the question on how to do it on ubuntu :
http://askubuntu.com/questions/814/how-to-run-scripts-on-start-up
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Do not set this on server. It sets-up transparent proxies system-wide. Anyone logged on to your system will be able to use it. If you can restrict access to individual users then let me know.