It's your Hosts file. Think of it as a Rolodex for your computer. Its where a computer looks first to translate the URL of a website into a numerical IP address that it can actually use.
For example yahoo.com is http://22.214.171.124
The use of Hosts file can speed things up a bit, but is almost unused today for its original intended purpose.
Today, the Hosts file is mostly used to block access to unwanted websites. Such as ad-servers and sites that are known to contain malicious code (viruses etc). This is done by assigning an IP address of 127.0.0.1 to any unwanted sites. 127.0.0.1 being ones own computer (localhost) which effectively blocks access to the site!
There are several readily availible Hosts file block lists that are used to totally block access to bad, suspect and annoying sites.
MVPS has an excellent HOSTS file block list,
"You can use a custom HOSTS file to block ads, banners, 3rd party Cookies, 3rd party page counters, web bugs, and even most hijackers. This is accomplished by blocking the connection(s) that supplies these little gems." About 30000 sites, ad-servers etc are blocked!
The use of a custom Hosts file is a nice extra layer of security. After all, a website can't infect you if you can not access it now, can it?