All the information you could possibly want is right here:
http://www.google.com/search?hl=en&q=what+is+the+windows+hosts+file
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Leonard Grey
Errare humanum est

Blocking Unwanted Parasites with a Hosts File:
http://www.mvps.org/winhelp2002/hosts.htm

...Alan
--
Alan Edwards, MS MVP Windows - Internet Explorer
http://dts-l.org/index.htm

On Thu, 21 Jun 2007 19:27:00 -0700, in
microsoft.public.internetexplorer.general, dexrnke

The Hosts (no extension) file is where your computer will first look for DNS
resolution. That means, like a phone book, your computer will look in the
Hosts file to find out where My.Web.com is located. Each entry has a normal
name and then the associated IP (tel number) address.

The trick is your computer has IP 127.0.0.1. So if you want to block ads or
bad web sites, you enter Bad.Web.Com   127.0.0.1 in the Hosts file. Then if
any web site tries to bring a popup from Bad.Web.Com, you only see Site  not
found.

There are places that have Host files you can download and they cover most
of the bad popup ad web originators.