Why do I need __init__.py at every level? [duplicate]

Yes, this file is required if you want directory to be treated as a module.

The __init__.py files are required to make Python treat the directories as containing packages; this is done to prevent directories with a common name, such as string, from unintentionally hiding valid modules that occur later on the module search path. In the simplest case, __init__.py can just be an empty file, but it can also execute initialization code for the package or set the __all__ variable, described later.

https://docs.python.org/3/tutorial/modules.html#packages

In a __init__.py file you have great possibility to document module, to get rid of the nested imports for a user/developer by providing the most useful objects(classes/functions) at the first level… …actually to be as simple in use as possible.

Edit after question update

The default importer/finder (examine the sys.meta_path) is:

1. BuiltinImporter – searches for/load a built-in module
2. FrozenImporter – searches for/loads frozen module (e.g. *.pyc)
3. PathFinder – the one you are interested in, allow to search for/loads a module based on the file system

The third is the __init__.py thing (actually the FrozenImporter as well).

ThePathFinder searches for a module in the paths from sys.path (and in __path__ defined in a package). The module could be either a standalone python file (if it is in the root of the search path) or a directory with __init__.py.

Referring to your example:

foo/
  bar/
    __init__.py
    baz.py

• If you create __init__.py in foo/, foo.bar.baz will be available (as you said).

• If you add foo/ to sys.path or pass it through PYTHONPATH=foo/, bar.baz will be available (note without parent module foo).

• If you write your own finder (and loader) you can load for example any file you want despite where it is. That gives you great power. For example take a look on stack-overflow-import, exposes code based on SO’s search results.