A Windows Defender and Microsoft Forefront Client Security signature file (1.53.256.0) was released at 8:45 PM (PST) on March 9, 2009 to address a Win32/PossibleHostFileHijack issue. This update modified the hosts file to prevent malicious redirection of websites. As a result, the entry for localhost may have been removed from the hosts file. When this entry is missing and a site is launched in the ASP.NET Web Development Server via Visual Studio, Internet Explorer displays “Internet Explorer cannot display the webpage”.To resolve this issue, open C:\Windows\System32\drivers\etc\hosts and add an entry for localhost:127.0.0.1 localhost
A new signature file (1.53.288.0) was released at 8:57 PM on March 9, 2009 that does not affect the localhost entry.
Superb, got a little bit of panic while developing my wifes website and it stopped working locally. Thanks for the tips.