ANSWER:

Also note another limitation of the host file approach: it breaks HTTP protocol version 1.1 (and above) virtual host functionality. Virtual host feature of HTTP protocol means you can have multiple host names handled by the same IP address. This works by the HTTP client (browser) inserting Host: header in the HTTP request. If you use shortened name, even if the request goes to the right IP address, the Host: field will have your shortened host name which will likely not be recognized by the HTTP server and you will not receive the expected page in this case.

Also I would expect breakage of secure HTTP (SSL) with this approach.

by FooF from http://superuser.com/questions/429903