Automatically Rescale ylim and xlim

You will need to update the axes’ dataLim, then subsequently update the axes’ viewLim based on the dataLim. The approrpiate methods are axes.relim() and ax.autoscale_view() method.
Your example then looks like:

import random
import matplotlib.pyplot as pyplot

pyplot.ion()

x = range(10)
y = lambda m: [m*random.random() for i in range(10)]

pLine, = pyplot.plot(x, y(1))

for i in range(10):
    pLine.set_ydata(y(i+1))

ax = pyplot.gca()

# recompute the ax.dataLim
ax.relim()
# update ax.viewLim using the new dataLim
ax.autoscale_view()
pyplot.draw()