Your two calls to last are meaningless since they appear at the end of their individual blocks; there's nothing else that would have been executed anyway. What I mean is that last is exiting the if conditional block, not the outter loop. There isn't any code to be executed after the if conditionals, aside from the next. Similarly your next NEWLINE is also meaningless since it is the last line of the while block. ...and the while block is named NEWLINE. Meaningless, because you're at the end of the block anyway, there's nothing more for Perl to do besides loop again, even without the 'next' call. You might derive some benefit from looking at perlsyn, where control flow is discussed.

If I wanted to print a newline before every line that begins with '10', I would do it this way:

perl -pi.bak -e "m/^10/ and $_ = $/ . $_;" filename.txt
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That you can disect after reading perlrun (to gain an understanding of one-liners), perlop (to look into logical short circuit operators), and perlvar (to see that $/ defaults to the newline character). Hope this is helpful.

You're only putting the contents of a line into $type once, before the loop. Get rid of the my $line and the my $type at the very beginning.

You don't appear to understand the purpose of last. It will exit your while loop, not the if, so you only go through the loop once. You don't need the two instances of last at all.

Doing while (<DATA>) as you do, each line will be in $_, which you can then check easily with a regex like this:

if(/^10/){
  print OUT "\n";
}
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or even shorter:

print OUT "\n" if /^10/;
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Then you do the line:

print OUT "$_\n";
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just once, for both cases. Remember the line is in $_

So now your while loop looks like this:

while(<DATA>){
  chomp;
  print OUT "\n" if /^10/;
  print OUT "$_\n";
}
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open (DATA, "test.txt") || die "Unable to open file: $!";
open (OUT, ">testout.txt") || die "Cannot create out file: $!";
while (<DATA>) {
    print OUT "\n" if /^10/; print OUT;
}
close (DATA) || die "Unable to close file: $!"; 
close (OUT) || die "Unable to close file: $!";
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