PHP generators and the Iterator API enable lazy evaluation to process large datasets without memory exhaustion. Generators use the yield keyword to produce values on-demand, consuming minimal memory compared to arrays that load all data at once. A benchmark shows generators using only 0.5 MB versus 120 MB for arrays when processing one million elements. The article demonstrates practical applications like reading huge CSV files and streaming API data, with real production cases showing memory reduction from 2 GB to 10 MB. Generators work by pausing execution at yield points and resuming when the next value is requested, making them ideal for processing infinite sequences or large files line by line.