I like to use a wildcard DNS entry for my localhost. The reason? If I want to establish a new virtual domain in Apache for testing, I need only go in and create my own arbitrary virtual domain (like railsdev.localhost), and the DNS side will "just work." On Linux machines, you can just edit /etc/hosts and put a *.localhost entry in. This didn't appear to work on OS X, so I instead enabled a local nameserver and went down that path.