Svchost.exe is a generic host process name for services that run from dynamic-link libraries (DLLs).
To find out what's inside each copy of svchost.exe, use the Resource Kit Support Tools' tlist.exe (with the -s switch). (You need to install the Support Tools from \support\tools on your product CD-ROM; they don't install by default.)
It is popular for this file to be infected with a virus so scan with a few virus scanners (like AVG) after all it's free. Also read
http://www.jsiinc.com/SUBJ/tip4600/rh4660.htm
this means you can disable some things that are bundeled in svhost.exe but denying the file is a bad idea as it is a "genaric" host and some programs MUST use it to access the net. It should still not be given unrestricted access as it may be a trojan trying to "call home"