The Android Emulator uses the DNS settings of your OS X machine from/etc/nf as mentioned above. I finally figured my way out, so I wanted to share with you how DNS works with the Android Emulator, and hopefully avoid the troubles I ran into. Because of this, I started messing with my OS X DNS configuration and got myself in a DNS mess.
The last few days I have been struggling to get the Android Emulator to connect to certain domains through a proxy we have at my job.