Hosts file is a list of web addresses. When you type an address on browser, it checks for instructions on the HOSTS file; if no record about a website is found, it opens a website for you. Otherwise, it opens a website from an IP address defined on the HOSTS file. If the address leads to 127.0.0.1, you won’t be able to access the website, because 127.0.0.1 is an IP address of your computer.
Windows XP, Vista and Windows 7