Example:
$ cat test
1 2 3 4 5 6 7
8 9
It will take every number as new variable, because every whitespace (be it single space, tab or new line is considered field separator)
$ for i in $(cat test); do echo $i; done
1
2
3
4
5
6
7
8
9
If we change IFS to $(), output is the same as is in the file:
$ IFS=$();for i in $(cat test); do echo $i; done
1 2 3 4 5 6 7
8 9
Unset IFS and it goes back to looking whitespace as IFS
$ unset IFS
$ for i in $(cat test); do echo $i; done
1
2
3
4
5
6
7
8
9
you can similarly make IFS change to null character with $’\0’
$ IFS=$’\0’;for i in $(cat test); do echo $i; done
1 2 3 4 5 6 7
8 9
IFS=$() is basically the same as IFS= or IFS="", you are declaring it equal to empty string so bash looks for end of strings as separators.
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