Perl doesn't read in the entire file each time through that loop. Each time through the loop, Perl just reads the next line from the still-opened file.

A few tidbits that might come in handy if you're doing anything more complex:

If you need to know the current line number, look at the $. variable (dollar dot).

The seek function can be used to go to a specific part of a file without reading the whole thing. The tell function returns the current file position in bytes, based at 0.