New to Python. For in loops curiosity

[Leonardo Petry]

Hi All,

So I am starting with python and I have been working on some simple exercises.

Here is something I found curious about python loops

This loop run each character in a string

def avoids(word,letters):
	flag = True
	for letter in letters:
		if(letter in word):
			flag = False
	return flag

The loop below (at the bottom) runs each line of the file

fin = open('wordplay.txt');
user_input = raw_input('Enter some characters: ')
count = 0
for line in fin:
    word = line.strip()
    if(avoids(word, user_input)):
    	count += 1;

This is just too convenient. 
Basically my question is: Why is python not treating the contents of wordplay.txt as one long string and looping each character?

Any comment is greatly appreciate. Thanks