Proper use of ‘yield return’

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The yield keyword is one of those keywords in C# that continues to mystify me, and I’ve never been confident that I’m using it correctly.

Of the following two pieces of code, which is the preferred and why?

Version 1: Using yield return

public static IEnumerable<Product> GetAllProducts()
{
    using (AdventureWorksEntities db = new AdventureWorksEntities())
    {
        var products = from product in db.Product
                       select product;

        foreach (Product product in products)
        {
            yield return product;
        }
    }
}

Version 2: Return the list

public static IEnumerable<Product> GetAllProducts()
{
    using (AdventureWorksEntities db = new AdventureWorksEntities())
    {
        var products = from product in db.Product
                       select product;

        return products.ToList<Product>();
    }
}

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Populating a temporary list is like downloading the whole video, whereas using yield is like streaming that video.

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