That's probably it. Usually this is caused by one of the AV products that I mentioned.
This is how/why this gets changed: Some software (PC-Cillin, Norton SW, apparently McAfee Spam Killer, and probably others) are essentially creating a local 'special' incoming mail server. This local mail server does some processing of messages (antivirus, spam checking, etc), then queues the mail for deliver to the mail client (Outlook Express). Now, OE is no longer getting mail from your ISP's mail server; it's getting it from the local machine's 'special' mail server. 127.0.0.1 is called the loopback address & it refers the computer back to itself. So that's why one of those products is setting OE to pick up mail from itself (the local 'special' mail server).
I assume that you're asking the question because of some problem? If not, leave it as-is. If there is a problem, it's related to whatever product is creating that.