He's referring to the Terminal app that lets you type commands; it's like the DOS command line. It's in Applications/Utilities, but I'm really wary of suggesting someone unfamiliar with Terminal use 'sudo' commands. 'sudo' is super-user do to force things to happen. In fact, my system is locked down enough that my username is not in the sudoers list, so I can't easily check out what you'll see without logging in as my system administrator directly.
See this xkcd comic: http://xkcd.com/149/
pico is an editor. It has command hints at the bottom. ^ stands for control, so ^-O means hold down control key and letter o to write out what you changed.
If you really want to do this, open Terminal from Applications/Utilities. Type the code shown in the bold mono-spaced font being sure to have spaces shown. Press enter at the end of code text:
sudo cp /etc/hosts /etc/host.backup this makes a copy so you can get it back
You'll be asked for the logged in user's password. Hit enter if there isn't one.
sudo pico /etc/hosts this puts you into the pico editor to change /etc/hosts file
Move around with the arrow keys (not the mouse) to add the lines you need. Save the file by writing it out.
