There are many situations where we want infinite recursion. A simple example is a server:

    def serve(request):
      response = process(request)
      socket.send(response)
      serve(socket.receive())

The same thing applies to anything which 'handles events', including servers, games, GUIs, CLIs, etc. In general, any time we might write a "main loop" like:

    foo = lambda z: ....
    bar = lambda x: ....
    baz = lambda y: ....

    def main():
      z = init
      while true:
        x = foo(z)
        y = bar(x)
        z = baz(y)

This is equivalent to having each step perform a tail-call to the next one:

    foo  = lambda z: bar(....)
    bar  = lambda x: baz(....)
    baz  = lambda y: foo(....)
    main = lambda  : foo(init)

The latter form has better encapsulation, requires no mutable state, doesn't have stale/out-of-date variables, etc.

The fact that infinite recursion is seen as a bug, yet "while true:" loops are common, is a symptom of this negative feedback loop which keeps people from learning and using recursive solutions.