Localhost refers to the standard hostname used to access the local computer or server on which a program is running. It is commonly associated with the IP address 127.0.0.1, which is a loopback address that directs network traffic back to the same device. This allows developers to test applications and websites locally before deploying them to a live server. When using localhost, users can run web servers, databases, and other services without needing an internet connection. This is particularly useful for software development, as it enables developers to troubleshoot and refine their projects in a controlled environment.