When Bob wants to access the encrypted file in the cloud, the cloud server needs to first decrypt the file for Bob using the proxy key as well as the cloud server's private key. (sciencedaily.com)
When you are logged on and using your device, it will automatically decrypt files on the fly as you need them. (lawyerist.com)
That means Dropbox can decrypt your files if it has a good reason to (like a subpoena). (lawyerist.com)