Does Windows have a hosts file?

YES, the file is in C:\Windows\System32\drivers\etc\ and is the first lookup for host name resolution (on Windows anyway) and therefore will override a DNS server name. See this Microsoft support article for specifics.

See wikipedia for some history on TCP/IP in general.

How do I know which host is down (not-matched)?

The host names in the match list that are not found will be displayed below the custom 'No Match' text (the reverse is true for the matched name case). Each host will be displayed for approximately 1(s) and rotate through the list.

Hosts Monitor is free software. If you use it we would appreciate your support so we can continue to make some useful tools.

And of course we appreciate your feedback so let us know what changes or any other questions or suggestions you may have here.