I use sendmail, though many people speak very well of postfix. OReilly has a Sendmail book, which examines the insides of sendmail in rather gory detail. Maybe that's why so many people choose postfix instead.
For general lingo, the linux documentation project is pretty complete.
As for "localhost", it just names a particular IP address 127.0.0.1, which by general network agreement is always the local box. Since so much internal communication on a particular box is done via tcp/ip you need a tcp/ip stack present, and an IP address to communicate with, hence 127.0.0.1
In ages past, before DNS, the host file (often found in /etc) was used to connect human readable names to IP addresses, since people thought that remembering a name (where do I send that mail, anyway?) was easier than remembering the fourfold octet (oh, yes, 188.8.131.52). By agreement, localhost was always listed first in the /etc/host file with its IP address. You should find it there, even now.
Since the address 127.0.0.1 is not routable outside the physical confines of a box, it is reasonably secure, so sendmail (for example) will send and recieve mail only for localhost, until that restriction is loosened in the human accessible configuation file (senmail.mc). The sendmail docs will generally explain each line in the sendmail.mc file pretty well. You can even use Webmin (google for it) to configure sendmail in a web-based GUI.
Last edited by cnjohnson; 08-29-2003 at 08:06 AM.