Host headers are used either to provide a user-friendly name to the web site address ( and not expose the actual machine name of the web server) or to have multiple IIS websites running on the same port but distinguished by different names.

For example, you may have a machine with the name abcxyz but you want the website url to be http://contoso and not http://abcxyz or you want to have two websites running in port 80 one going to c:\inetpub\wwwroot\folder1 and another going to c:\inetpub\wwwroot\folder2. In these scenarios host headers are useful.

To install EP with host headers

(1)    Create an IIS Web site and configure host header http://support.microsoft.com/kb/190008

(2)    Create a web application in SharePoint Central Admin tool and choose existing IIS Website and pick the one that is created in the above step

(3)    Change to NTLM authentication for HTTPWebRequest in Version 3.5 SP1 http://msdn.microsoft.com/en-us/library/cc982052.aspx

(4)    Install EP and select the IIS Web site / SharePoint Web application created in step 2

Refer to the attached document for screenshots