Item 1.) Loopback and localhost are settings within your computer that enable your computer to make network connections inside a network, and also outside on the internet.
127.0.0.1 IP IPv4 is nothing to worry about, it is a part of the HOSTS file, it is the reason I pointed the Microsoft link for you on this subject. If you can see this, on a system that supports IPv6, the localhost address is
::1. XP does not natively support the newest version 6 level, but Vista and Win 7 do.
To check the settings of your router, try typing in the following IP address in the address bar of the browser you use:
192.168.0.1. Press enter to display the web page of your router. If this does not work, then try going to the site of the router manufacturer, and determined the correct internal IP address for that device. Suggested general link here:
http://compnetworking.about.com/od/workingwithipaddresses/f/getrouteripaddr.htmWiki(Encyclo)pedia is a good site to take a little time to get the gist of what networking is, and what a firewall is supposed to do:
http://en.wikipedia.org/wiki/Main_Page Just type in the search box what you are interested in finding out and/or need to know.
Item 2.) You will likely find out your router does not have its' internal hardware firewall turned on; if so, then go to the manufacturer's website to find out how to do this properly. You may also find the router is not secured with a strong password to prevent outside intruders from changing the internal settings of your router without your knowledge or permission.
The more you know about basic router settings, the better off you will be.
Just be glad an user of Avast! AIS is not forced to know how to configure his/her system for best security and protection; default settings alone should be enough for most users. Trust more, and worry less; but still get the questions you are asking answered by looking for them on the internet.
Hope this answers some of your questions.