Question re Hijack this entry - Internet Security, Proxy Override

Hi,

I don't have a problem - just a question. I'm learning to interpret Hijack
this entries and would appreciate comment on the following entry:

R1 - HKCU\Software\Microsoft\Windows\CurrentVersion\Internet
Settings,ProxyOverride = http://localhost;

From what I understand, proxy override overrides any proxy server that has
been set, so in this case the http:// request is instead redirected to local
host - which is the computer sending the request.....? Is this right?
Does this mean that the request would just loop back to the originating
computer - in which case you would get "page not found" ??? or is the
implication that it sets the local computer up as a server??? I'm not really
sure what it means. I have seen hijack this fixes in forums where some people
leave it as not needing to be fixed and others who insist it is fixed.
Someone I asked said it was a "bad thing" but I would liek to understand why.

That's what I'm already doing, but with a different tech site. Which is the
whole point of my post - I'm trying to find out more about the things I need
to learn about.

Thanks, but this doesn't really help. I've looked at all these tutorial
sites before and they are very general. I specifically want to know about
this entry - I'm assuming it must be bad, but as I said in my original post,
what does it actually mean? Does it mean that the local computer is set up as
a server? Does it just redirect everything to "page not found"? I did see
somewhere that trojans can exploit this entry for proxy override, but how?
Does it make any difference if you have this entry on your computer if you
are say in a corporate environment and you are behind a proxy server as
opposed to a home user who is not using a proxy server but sits behind a
router on a LAN as opposed to a home user who uses no proxy server and
connects directly to the internet?

This doesn't look malicious.

The ProxyOverride settings just determines which sites don't redirect
through the proxy server and http://localhost usually doesn't need to go
though a proxy.

If the ProxyServer setting had been overrriden with http://localhost it
would be suspicious since it would mean there was a proxy server server
running on the local machine that all traffic was being redirected though.