Sorry about the thread resurrection, I never came back to this one for some reason.
The "hosts" file is just a manual mapping of IP address to DNS name. The local hosts file is checked prior to checking with DNS servers, if an entry is found it doesn't bother checking with DNS, it just uses that entry.
This article covers how to change entries in the hosts file for windows/mac/ubuntu.
Hopefully your issues have been resolved and you won't have to mess with this.