Why does the Network icon in the Finder sidebar in Lion have no function on my Mac?

Question

Since installing Lion on my Late 2007 MacBook Pro, which cannot support AirDrop, an icon called "Network" has appeared under Favorites in my Finder sidebar. This icon seems to have no function. Clicking on it only reveals the error message

"Network" can't be opened because the original item can't be found.

There is also no option to disable its appearance in Finder Preferences.

The Network icon seems to disappear on occasion, only to reappear later.

I can find no documentation of this mysterious icon, and no reference to its existence anywhere.

Can anyone suggest what this icon is and why it is being displayed?

Addendum: Note that there are indeed other network computers visible on my LAN in the finder, whereas the little gray Network icon in the Sidebar does not display any of them.

Note that there is no item named "Network" for me to remove in my Finder preferences: