What is Proprietary Format?

Legal Definition
A proprietary format is a file format of a company, organization, or individual that contains data that is ordered and stored according to a particular encoding-scheme, designed by the company or organization to be secret, such that the decoding and interpretation of this stored data is only easily accomplished with particular software or hardware that the company itself has developed. The specification of the data encoding format is not released, or underlies non-disclosure agreements. A proprietary format can also be a file format whose encoding is in fact published, but is restricted through licences such that only the company itself or licencees may use it. In contrast, an open format is a file format that is published and free to be used by everybody.

Proprietary formats are typically controlled by a company or organization for its own benefits, and the restriction of its use by others is ensured through patents or as trade secrets. It is thus intended to give the license holder exclusive control of the technology to the (current or future) exclusion of others. Typically such restrictions attempt to prevent reverse engineering, though reverse engineering of file formats for the purposes of interoperability is generally believed to be legal by those who practice it. Legal positions differ according to each country's laws related to, among other things, software patents.

Because control over a format may be exerted in varying ways and in varying degrees, and documentation of a format may deviate in many different ways from the ideal, there is not necessarily a clear black/white distinction between open and proprietary formats. Nor is there any universally recognized "bright line" separating the two. The lists of prominent formats below illustrate this point, distinguishing "open" (i.e. publicly documented) proprietary formats from "closed" (undocumented) proprietary formats and including a number of cases which are classed by some observers as open and by others as proprietary.
-- Wikipedia
Legal Definition
This is the format that a software program will accept or output data that is enetered into the program. This is what stops various computer platforms from being used by other programs. It makes them incompatable with other software formats.