Can a Macbook Air host a network? I'm going to be away for a few days and will be taking both my Macbook Air and my iPad away with me.

Whilst we're stuck in a hotel room I may not have internet connection (I'm not willing to pay for hotel wifi) but would like to be able to share the iTunes library between my iPad / iPhone / Air

Without being connected to a router can I do this?  Can the Air host its own private network just for local devices?
There are a couple of ways of acheiving this:
Adhoc, peer to peer, computer to computer
You can create a peer to peer wireless network between devices that does not require an Access point or other routing device.  This is usually known as creating an ad-hoc wireless network, or a computer to computer one, rather than an infrastructure one.
I currently only have access to a machine with Mountain Lion on, and things appear different (this method is unavailable), but in Lion or earlier you should be able to:

Go to the menu bar, go to your network indicator and choose &quot;Create
Network...&quot;
Enter a network name, and security settings if required
On your iPad, go to Settings, go to WIFI and choose the network you
just created. Enter the password if you set one and you should get
connected.

Any devices connected this network should only be able to communicate with other devices on the network, no routing or other traffic is available.
Internet Sharing
Another option is to use Internet Sharing.  On the off chance that you have free or cheap hotel internet:

Open System Preferences and go to the Sharing pane under the
Internet &amp; Network heading.
On the list of services to the left, select Internet Sharing. Don’t
check it quite yet — there’s a few options that need to be set
first.
Depending on what your current internet source is, select it from
the menu next to “Share your connection from.”. Built-in Ethernet is
a good choice, but if you have a mobile broadband dongle you could
select that also.
In the “To computers using” box, select and check AirPort/Wifi from
the list.
Click on the AirPort/wifi Options button to configure security
settings if you want any.
In the window that pops up, type a basic Network Name, Click OK.
Setting up Mac OS X Internet Sharing
The configuration portion is finished, so the only thing left to do
is check the box next to Internet Sharing and enable it. A
confirmation message will appear — click Start to complete the
process.
Now that your Mac’s internet is being transmitted from your AirPort
WiFi card to other devices, you should see an different icon in your
menu bar. If you do, you’re in business!
On your iPad, go to Settings, go to WIFI and choose the network you
just created. Enter the password if you set one and you should get
connected.

Now any machine connected to the same wifi network can route through the ethernet or dongle connection on the air.  If you have no connection available through those connection, then the same peer to peer communications should be available still.