On the mac, we can easily update the 'hosts' file and send a web-service hit to local server, and get the required data (faster). Can we do something similar if the Server and iOS application are both under the same Wifi network (for example)?
I don't think there is a 'hosts' file for the iOS devices. But you can use bonjour service to advertise your server over local WiFi network. Your iOS app can use bonjour to discover such servers.