Fiddler gets the initial system proxy settings on startup. Then Fiddler sets the system proxy settings to point to Fiddler. The default behavior of Fiddler is using the initial system proxy settings, it has read, in order to send the captured requests to this proxy, if any. I.e. Fiddler becomes the system proxy and the initial system proxy becomes the proxy of Fiddler.
However, you could modify the Fiddler's proxy from the Gateway tab of Tools\Options...
In your case it seems that the initial system proxy settings are set to use the WPAD protocol for proxy auto-discovery. However, if for some reason the protocol fails, Fiddler falls back and tries to send the request without using a proxy.
I hope that this information is useful to you.
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