A strange list, how does this work?

[snippsat]

Is this some new use of a list??

It's list comprehensions not new as it has been a part Python language for 20-years PEP 202.

If break it to ordinary loop and append to a new list way,it would look look like this.

>>> words = 'hello123 world'
>>> new_lst = []
>>> for w in words:    
...     if w.isdigit():        
...         new_lst.append('X')
...     else:    
...         new_lst.append(w)
...         
>>> new_lst
['h', 'e', 'l', 'l', 'o', 'X', 'X', 'X', ' ', 'w', 'o', 'r', 'l', 'd']

>>> words = 'hello123 world'
>>> [''.join('X' if w.isdigit() else w for w in word) for word in words]
['h', 'e', 'l', 'l', 'o', 'X', 'X', 'X', ' ', 'w', 'o', 'r', 'l', 'd']