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#11
Yes, the PC always uses the Host file first. This gives you complete ability to override and set DNS entries to whatever you want. Of course, the downside is that if the site ever moves to a new IP, you have to update your hosts file accordingly...otherwise you will still be pointing at the old IP which may or may not resolve to anything.
That's what I do with my computer. It should also help avoid MIM attacks. I have a few entries in my HOSTS file and they are for the SSL login pages of websites I frequent.
The MVPS has a point worth noting:
Editors Note: in most cases a large HOSTS file (over 135 kb) tends to slow down the machine.