Thanks for the link DragonSlayer.
I believe those are just common schemes the OS uses to identify your machine in case you are on a network.
It is OK, I remmber years ago while trying to setup a windoze server (a PDC) I ran into this problem and of course the Unwritten rule in the case of MS was, to leave it as .local
otherwise it kept bugging me about a my machine's name dot domain name...
in your case I think you should leave it as local or anything you wish, like localhost.local
the $ dollar sign is usually used to point to a string or substitute a value for a string..like the name of the user would be $USER it means to get the value for that string (i think)?!so if you were logged in as Bob ,$USER or $USERNME would return Bob.
so $localhost means whatever you named your computer in Linux (I think). so like if you named it RedHat then $localhost would return RedHat.
Sorry if I am not 100% correct on these things I am trying to learn too and I appreciate other ppl correcting me.
Oh since I think it is important for all of us to be familiar with the script methods here's a link I found which may be useful;