Is Proxy Factory necessary in NHibernate?

I've this configuration in the hibernate.cfg.xml:

<?xml version="1.0" encoding="utf-8" ?>
<hibernate-configuration xmlns="urn:nhibernate-configuration-2.2">
  <session-factory>
    <property name="connection.provider">NHibernate.Connection.DriverConnectionProvider</property>
    <property name="connection.driver_class">NHibernate.Driver.SqlClientDriver</property>
    <property name="dialect">NHibernate.Dialect.MsSql2005Dialect</property>
    <property name="connection.connection_string">Data Source=.\SQLEXPRESS;Initial Catalog=MyDB;Integrated Security=SSPI;</property>
    <property name="show_sql">true</property>
  </session-factory>
</hibernate-configuration>

I've just created a Class Library and I've created an integration test using MbUnit. It fails. A part of the report(the one which I think is enough) goes here:

** NO TESTS WERE RUN (No tests found) **
TestCase 'M:IntegrationTests.RepositoryTests.ListAllPostsReturnsAListOfPost'
failed: The ProxyFactoryFactory was not configured.
Initialize 'proxyfactory.factory_class' property of the session-factory configuration section with one of the available NHibernate.ByteCode providers.

I have read many tutorials and haven't seen this proxy factory configuration. Is specifying it really necessary? If so, how can I do that? Do I've to reference some other library?

Solution

If you're using the latest of NHibernate(2.1), you'll notice that mainline for NH doesn't have a dependency on castle for proxy generation anymore, so all those tutorials you've been looking at are probably out of date.

Basically, you now have a few choices of how you want your dynamic proxies created, so you'll need to explicitly configure which proxy generator you want to use. Examples can be found in this how-to post on forge. A full list of the options is referenced here.

P.S. if you want to keep things simple, just use Castle as the older versions of NHibernate all used it by default.