Hosts is a system preference pane to manage your hosts file.
Hosts add a preference pane to your system preferences which lets you toggle your host file entries on and off, as well as add and remove them.
Hosts.prefpane likes to keep your hosts file clean. When an entry is toggled off, it is not commented out in the hosts file, but instead stored in the app's preferences storage. This means you will have to uncomment all your unused host entries and untoggle them in the prefpane if you want to use them. Comments are treated as comments and will never show up in the list of host entries!
Ofcourse Hosts.prefpane will detect edits you made to the /etc/hosts directly and merge them into the listing.
Backups of your hosts file is made in ~/Library/Application Support/Hosts. The backup or your hosts file from before you started using Hosts.prefpane is called hosts.orig and each session a backup is made called hosts.session.
The default host entries that are needed by the OS are hidden and can not be edited using Hosts.prefpane.