Automatic configuration script in IE 8

I am trying to create a Proxy.pac script for IE8. I have the following code whicg I found on Google :-)
javascript:alert ("Start of our PAC File");
    function FindProxyForURL(url, host)
        {
           javascript:alert ("Inside the function");
           return "PROXY isa.proxy.server.com:80";
       }

I have added the script by entering "C:\Temp\Proxy.pac" but it doesn't seem to apply. As far as I have found out, when the proxy.pac script is run it should show up in Temporary Internet Files.

Is there anything else that has to be changed to use the script and does it have to be located on a website?

/Lasse