The latest modification of the hosts file allows access to Youtube, Picasa, Twitter, and Facebook.
The function of the hosts file is equivalent to a DNS (you can look up what DNS is online). When you are online, the system will first check the hosts file. If it finds the relevant entry, it directly converts the domain name into the saved IP address. If not, it then uses the DNS server for resolution. In other words, if your hosts file contains all the domain names and their corresponding IP addresses in the world, then your computer would be a super DNS server. Of course, no one can achieve that.
I have previously written separately about how to access Youtube, Picasa, and Twitter. Here, I'll summarize them. The previous method of accessing Twitter by modifying the hosts file seems to have become invalid, but here's the latest one that still works.