Performing an 'strace' on this code: 
open(F, "<README");   # arbitrary
$|=1;

while(<F>) {
    print "line $.\n";
}

[download]
Results in this: 
open("README", O_RDONLY|O_LARGEFILE)    = 3
read(3, "\t\t    GNU GENERAL PUBLIC LICENSE"..., 4096) = 4096   # firs
+t block
write(1, "line 1\n", 7line 1
write(1, "line 2\n", 7line 2
...
write(1, "line 80\n", 8line 80
read(3, " and appropriately publish on ea"..., 4096) = 4096     # seco
+nd block
write(1, "line 81\n", 8line 81

[download]
So it does appear to buffer the data in chunks, but they seem to be managably sized. This too may differ depending upon OS or build of Perl.

In reply to Re: Re:ading lines by Fastolfe
in thread open, file handles and memory by Viking

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