How the iter() method work in the str class?

iter only returns its argument if the value is an iterator. str is not an iterator; it is an iterable whose __iter__ method returns a str_iterator object.

>>> a = iter(b)
>>> type(a)
<class 'str_iterator'>

The str_iterator object implements __next__, and maintains iteration state separate from any other iterator over the same object.

>>> b = 'hello'
>>> a1 = iter(b)
>>> a2 = iter(b)
>>> next(a1)
'h'
>>> next(a2)
'h'
>>> next(a2)
'e'
>>> next(a2)
'l'
>>> next(a1)
'e'

You could picture str_iterator being defined something like

class str_iterator:
    def __init__(self, s):
        self.s = s
        self.i = 0

    def __iter__(self):
        return self

    def __next__(self):
        if self.i == len(self.s):
            raise StopIteration
        i = self.i
        self.i += 1
        return self.s[i]

 class str:

     ...

     def __iter__(s):
         return str_iterator(s)

The iterator remembers is position in the string between calls to __next__. The job of __next__ is to advance the "pointer" and to return the character at the correct position.