It looks like
your initialization script is attempting to do xhost to
add hosts to the list of hosts to be trusted by this X server. See
<http://www.netadmintools.com/html/xhost.man.html> This is the "old
school" way of doing security with X11; I think they now have a
public/private key pair based way of doing things.
Yes, xauth. Xauth has been around for about twenty years, though;
it's just that it's sometimes not used because it's a pain in the butt.
There's also a standardized method to use Kerberos 5 to authenticate
clients to X servers, believe it or not!
Let's also not forget about "ssh -X".
Peace... Sridhar