HOSTS file hijacking is on an increase. HOSTS file play less of the role they use to thanks to DNS servers, however they are still utilised in certain instances, like making sure the domain you type in is the one you want by placing the correct IP address in there with them.
They are also useful for giving your own computers on an LAN network petnames, so you can contact them through the browser if they are serving things like websites etc.
(i.e. Rather than typing 192.168.0.2 for another machine, you can write a name like "Comp2" and it will find it, but only if it's rigged up for the protocols supported by the browser)
HOSTS files are also used in configuring linux boxes with things like Sendmail, and Apache. Useful for creating internal subdomain names that don't work outside of the servers structure.