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This code fragment from the documentation of iter() doesn't work as intended. Change "STOP" to "STOP\n". Maybe also check for EOF as it hangs.
with open("mydata.txt") as fp:
 for line in iter(fp.readline, "STOP"):
 process_line(line)
Or maybe this makes a better example because it's clearer wha'ts going on:
square_generator = (i * i for i in range(100000))
for n in iter( square_generator.next, 144):
 print n