Weird name under the "Shared" of the Finder's sidebar

I have a macbook pro which is just upgraded to Lion.
It was going fine but few hours ago, a weird name that I don't know showed up under the 'Shared" of my Finder's sidebar. When I cliked it, it said "Connection failed" and disappeared. Now there is no "Shared" in the sidebar at all.
So first of all, what is this "Shared"?
And if there is another computer under "Shared", does it mean that computer can see what I'm doing or something?
Also, since it said it failed to connect, that computer wasn't connected to mine, right?
Am I being hacked????????????
Thank you, I'm just a bit concerned with this... odd predicament that I never encountered to during my macbook experience.

So this unknown is using my network because of my insecure wireless router, but it's not like that device can look into my account?
Yes, that's a possibility.  If your wireless network does not have a password, that's the most obvious explanation.  I live in a suburban area, houses close but not too close, and I can see up to four of my neighbors' networks, depending on the day and what part of the house I'm in.  The ones that are open, I could join if I chose to.  In an apartment building, you're going to have many more people close to you, while if you live out on a farm somewhere, you probably have nobody living in range.  In any situation where you have people living (or commonly travelling) nearby, you should lock down your network with a password.
And no, that device can't hack your computer unless you have a service open in System Preferences -> Sharing.  You won't by default.  Of course, an untrusted person on your network could potentially view all your network traffic, which could be a problem.  All the more reason to lock down the network.

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