Windows Vista, Windows 7 and Windows 8 all use the User Account Control (UAC) feature. When an application requires administrative priveleges, or when you or a program attempt to change registry or system settings, it will prompt you to ask if that's OK.
The smart thing to do is leave it on, unless you have a specific reason and you are aware of all the security holes it opens. You can turn it off completely in the Control Panel or you can activate the built-in "Administrator" account and use that, but it is highly discouraged.
You can read more about UAC on the Microsoft Support website.
User Account Control (UAC) is a feature in Windows that can help prevent unauthorized changes to your computer. UAC does this by asking you for permission or an administrator password before performing actions that could potentially affect your computer's operation or that change settings that affect other users. When you see a UAC message, read it carefully, and then make sure the name of the action or program that's about to start is one that you intended to start.
By verifying these actions before they start, UAC can help prevent malicious software (malware) and spyware from installing or making changes to your computer without permission.
Your hosts file resides in a protected folder, and a program needs to be running as administrator in order to modify those files.
To edit the hosts file, simply run notepad as administrator. Right click Notepad, then click Run As Administrator. UAC will ask you if it's okay that Notepad now has the ability to do whatever it wants. Confirm that.
From Notepad, open the hosts file, and you can then modify and save it.