Hosts file & slow loading?

About 6 months ago my daughter forced me to stop being a dinosaur when she
moved her family to Florida. (I don't even own a cell phone) She gave me her
old Win98SE computer after she "cleaned it" when she got a new one. I am
using Wal-Mart dial up ($9.94/mo. Ok, I'm cheap she says, It's really AOL
shell but with Wal-Mart branding). 520 mb ram she says, 120gb drive,
(70%free space), all the usual ad stoping/spyware programs and AVG Free virus
stuff.
It's slow on loading up pages. Real slooow. I can go to the kitchen and pour
a cup of coffee and return and it's still loading. A young neighbor said it's
probably the Hosts file. He explained and I kind of understand the principle.
I looked at the host file and there is a boat load of sites there.
1. Doesn't this slow down the web browsing if it has to look for these sites
first? 2. What would happen if I deleted these? 3. Can I set it up so it
doesn't have to download pictures? 4. Would that be faster?
Be kind, I'm an emerging Rip Van Winkle coming out of a 30 yr sleep. Lot of
catching up to do.