c=open("1.txt")
d=open("2.txt")

for line1 in c: 
   for line2 in d: 
      print line1,line2


1.txt contains: 

blah1
blah2
blah3


2.txt contains:

moo1
moo2
moo3
moo4
moo5

output from above snippet generates the following:

blah1
moo1

blah1
moo2

blah1
moo3

blah1
moo4

blah1
moo5