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Using service proxies in a Service Mesh significantly enhances scalability and flexibility. Service proxies allow dynamic routing of requests between services, which means that applications can easily scale up or down based on demand without significant reconfiguration. This is particularly important in microservices architectures, where various services need to communicate with each other efficiently.

Furthermore, service proxies handle service discovery, load balancing, and traffic management without hardcoding these aspects into the application itself. This separation of concerns enables developers to quickly adapt to changes such as adding new services or altering the way services communicate, without being tightly coupled to a specific infrastructure configuration.

The options highlighting decreased network latency or enhanced data encryption address specific operational improvements, while automated testing features do not directly relate to the core functionalities provided by service proxies in managing service communication. Therefore, the scalability and flexibility brought by service proxies is a central advantage of implementing a Service Mesh in a microservices architecture.