We could say that the proverb is about how a wise man ought to react to the praise he receives, for certainly not all to react in this way. A wise man knows his own heart and its tendency to think more highly of itself than it ought.
The tendency to let even valid praise harm us is offset by reminding ourselves of all the sin still within us, and that all we have has been given top us. We are not told to turn away all praise and certainly God will say to each one of his elect, ‘Well done, thou good and faithful servant … enter into the joy of thy Lord’. Though we will scarcely know how to accept this praise, we will give thanks back to God for what he has made us by his grace.
Some use flattery as their tools of trade. The advertising industry and the political arena both flatter habitually and are extremely successful by doing so. Man is highly susceptible to this form of deception. The world of course is aware of this, but it still manages to be taken in by those who are continually telling us that we are basically good people, who can solve our own problems, who do not need God’s standards over us because we are quite capable of setting our own moral standards and living up to them and creating a moral society.
This proverb has received a number of translations, some of which add words in an attempt to arrive at an acceptable sense, but end up changing the meaning of the verse entirely. The KJV sticks closely to the original with little embellishment, but is presumably thought by other translators to produce a translation which is unintelligible and therefore needs amending. In the second part of the verse the NKJ has, ‘And a man is valued by what others say about him.’ A literal rendering would be, ‘A crucible for silver and a smelting pot for gold and a man to the mouth of his praise.’ The verse is obviously a comparison, so the KJV adds the words ‘As … so …’. Whereas other translations understand the man to be enhanced by his praise, the KJV rendering makes him a discerning critic of his own praise. This is the most natural sense of the words and gives a very important lesson.