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The functionality is still there, Just because the file isn't there doesn't mean Microsoft isn't doing anything that the eye can't see. On ME and 98 systems the HOSTS file will be in C:\WINDOWS
Again, any little spyware program can modify this file OR create it in your case to manipulate what is going on. And if by chance you're still using 95, I seriously think you should just set that system on Fire.
But either way, if you PUT entries in there then keep them, however MOST Internet users don't know all of the Windows files of the sort and when an issue of this sort arises you don't know what specific thing it's going to be so just clear it out. And Hey, while were on the topic, you should keep a backup of it anyways like any other file on your system.
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