What is localhost?

Localhost = This computer

If someone tells you: "Connect to localhost", he is asking you to connect from your own computer to your own computer.

Localhost is a standardized name of a computer (host name) that means "this computer".

If you are connecting to some computer, you are usually defining the target by host name. As an example, if the target computer has host name abc, you can connect to that computer just by entering abc to a host name textbox.

If you enter localhost instead of other compuer name, you will get connected to your own compuer.