The os.popen function just returns a file-like object. You can use it like so:

import os

process = os.popen('gcc -E myHeader.h')
preprocessed = process.read()
process.close()

As others have said, you should be using subprocess.Popen. It's designed to be a safer version of os.popen. The Python docs have a section describing how to switch over.

os.popen is just a wrapper around subprocess.Popen along with a io.TextIOWrapper object:

The returned file object reads or writes text strings rather than bytes.

If Python's default encoding doesn't work for you, you should use subprocess.Popen directly.

The underlying issue is that cmd writes ansi garbage by default, even when the output is to a pipe. This behavior may depend on your Windows version.

You can fix this by passing /U flag to cmd:

p = subprocess.Popen('cmd /u /c dir', stdout=subprocess.PIPE)
result = p.communicate()
text = result[0].decode('u16')

I think the problem is with the statement for line in proc.stdout, which reads the entire input before iterating over it. The solution is to use readline() instead:

#filters output
import subprocess
proc = subprocess.Popen(['python','fake_utility.py'],stdout=subprocess.PIPE)
while True:
  line = proc.stdout.readline()
  if not line:
    break
  #the real code does filtering here
  print "test:", line.rstrip()

Of course you still have to deal with the subprocess' buffering.

Note: according to the documentation the solution with an iterator should be equivalent to using readline(), except for the read-ahead buffer, but (or exactly because of this) the proposed change did produce different results for me (Python 2.5 on Windows XP).