emacs ansi-term remote directory tracking?

Question

I followed the instructions on here:

http://www.emacswiki.org/emacs/AnsiTermHints#toc4

But C-x C-f still only tries to open files from my local directory. My /etc/hosts seems to contain the full address. What else could be wrong?

Edit: I should add the remote systems are Red Hat and SUSE Linux (two separate systems).