rdmurray@hey:~/python/p32>cat bad.py

    This line is just ascii
    A second line for good measure.
    This comment contains undecodable stuff: "�" or "\\xe9" in "pass�"" cannot be decoded.

The last line above is in latin-1, with an é inside those quotes.

    rdmurray@hey:~/python/p32>cat bug.py      
    import sys
    with open('./bad.py', buffering=int(sys.argv[1])) as f:
        for line in f:
            print(line, end='')
    rdmurray@hey:~/python/p32>python3 bug.py -1
    Traceback (most recent call last):
      File "bug.py", line 3, in <module>
        for line in f:
      File "/usr/lib/python3.2/codecs.py", line 300, in decode
        (result, consumed) = self._buffer_decode(data, self.errors, final)
    UnicodeDecodeError: 'utf8' codec can't decode byte 0xe9 in position 99: invalid continuation byte
    rdmurray@hey:~/python/p32>python3 bug.py 1 
    Traceback (most recent call last):
      File "bug.py", line 3, in <module>
        for line in f:
      File "/usr/lib/python3.2/codecs.py", line 300, in decode
        (result, consumed) = self._buffer_decode(data, self.errors, final)
    UnicodeDecodeError: 'utf8' codec can't decode byte 0xe9 in position 99:
    invalid continuation byte
    rdmurray@hey:~/python/p32>python3 bug.py 2
    This line is just ascii
    A second line for good measure.
    Traceback (most recent call last):
      File "bug.py", line 3, in <module>
        for line in f:
      File "/usr/lib/python3.2/codecs.py", line 300, in decode
        (result, consumed) = self._buffer_decode(data, self.errors, final)
    UnicodeDecodeError: 'utf8' codec can't decode byte 0xe9 in position 0: invalid
    continuation byte

So, line buffering does not appear to buffer line by line.

I ran into this problem because I had a much larger file that I thought
was in utf-8.  When I got the encoding error, I was annoyed that the
error message didn't really tell me which line the error was on, but I
figured, OK, I'll just set line buffering and then I'll be able to tell.
But that didn't work.  Fortunately using '2' did work....but at a minimum
the docs need to be updated to indicate when line buffering really is
line buffering and when it isn't.