As Justin Carmony points out, Mac OS Lion changed its behavior towards DNS and the usage of /etc/hosts (it quite disregards this file).

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This has several ugly effects, including:

• no matter how many Apache Virtual Hosts you've set up, you will only get the first (that is, the implicit default), and only by typing localhost into your browser
• the Passenger pref pane won't work any more (actually it does, but it has no effect)