Localhost
localhost is a WSL2 linux process, created by mini_init. Its role is to forward network traffic between the WSL2 virtual machine, and Windows.
NAT networking
When wsl2.networkingMode is set to NAT, localhost will watch for bound TCP ports, and relay the network traffic to Windows via wslrelay.exe
Mirrored networking
In mirrored mode, localhost registers a BPF program to intercept calls to bind(), and forward the calls to Windows via wslservice.exe so Windows can route the network traffic directly to the WSL2 virtual machine.
See src/linux/localhost.cpp.