IMON Compatibility/Efficiency Explanation

Can someone provide a clear description on what higher efficiency or compatibility (passive host list) means. In searching, I find alot of suggestions to add sites to the passive host list, but am curious about what it does differently then if a host is not listed in there.

My intention is to exclude some local sites (localhost apache running on ports 3000-3009) as well as Intranet sites. We are a software development company and I want to exclude monitoring our web-based software for our developers.

If adding to the passive host list is the answer can you provide specifics on how much detail I need for instance would I list 127.0.0.1 or do I need http://127.0.0.1 or even http://127.0.0.1:3000, etc. Can I list by IP and/or hostname (localhost)?