The symptoms described indicate that Fiddler is listening properly and it isn't blocked by a firewall. However, they also suggest that your system's proxy settings are not getting set correctly.
You can manually look at your proxy settings by clicking Tools > WinINET Options > LAN Settings while Fiddler is "Capturing". These should be pointed at 127.0.0.1:8888 but based on your description, they probably aren't.
There are a few possibilities:
1> You are on a corporate network where the IT Administrator has used Group Policy to enforce a particular proxy. The WinINET options will typically show a yellow banner if that's the case.
2> You have some other software installed which is interfering with the system proxy setting. Some security software or VPN software will constantly overwrite the proxy settings.
3> Your system has some configuration problem where the proxy settings are not properly being persisted. You can try setting the proxy setting to address 127.0.0.1 and port 8888 yourself, click "Ok" and see if the settings "stick."
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