i am setting up a mail server....but i know i need to edit the conf in /etc/hosts....

What should the file include if i want to setup a mail server that for providing account for other people?

i have not registered any domain (like abcd.com), so need i register one in order to get a domain name?

Also.... i am not very clear about setting up the mail server (I am going to use the whole PC for doing only the mail server job)

Not necesarily, it depends what services you want to provide and how you set them up.
What services do you want to provide? your hosts file is the least of your problems.
Only if you wnat to receive e-mail. Otherwise delivery would be impossible.
I would reccommed the following server software...
MTA: Qmail
IMAP: courier-imap
AUTH: openldap
HTTPD: apache
WEBMAIL: Squirrelmail

The legal mail address can be also in the form
   my_name@[xxx.yyy.zzz.vvv]
where xxx.yyy.zzz.vvv is numerical IP address
so domain name registration is not really required (static IP is enough).
This way you can send & receive mails (and whatever you want).

Something else to consider, if you're going to register a domain and go with a full blown email server, is DNSing. You'll either have provide your own DNSing, which means setting up and running a DNS server like Bind, or rely on someone else to do it. There are some free ones like dyndns.org around. But the main point here is, is your IP static or dynamic. If it's dynamic, then running an email server from a box with a dynamic IP is not adviseable. If the IP doesn't change very often, like once in a blue moon, then sure you can get away with it. However keep in mind that everytime it changes it takes time for the DNS roots to catch up, sometimes a couple days (assuming you change it at your registar). That means during that time any email being sent to your hostname will instead be sent to your old IP, or even worse to someone else's email server whom has aquried your old IP. It also means that any of the people trying to connect to your server remotely to check their email will be unable to do so.

but i got something clear....
if i want to provide email with domain like something@test.net..how can i achieve that?

There are a few things:
1) Register a domain
2) Point the domain to your IP address preferably a static one - see DaHammer's post
3) Set up server software to receive incomming mail
4) Set up retreival software so users can download mail
5) Create you user accounts

I gave a list of my reccomended server software in my first post.