What makes grep consider a file to be binary?

I have some database dumps from a Windows system on my box. They are text files. I’m using cygwin to grep through them. These appear to be plain text files; I open them with text editors such as notepad and wordpad and they look legible. However, when I run grep on them, it will say binary file foo.txt matches.

Pseudo files for temporary data

I often want to feed relatively short string data (could be several lines though) to commandline programs which accept only input from files (e.g. wdiff) in a repeated fashion. Sure I can create one or more temporary files, save the string there and run the command with the file name as parameter. But it looks to me as if this procedure would be highly inefficient if data is actually written to the disk and also it could harm the disk more than necessary if I repeat this procedure many times, e.g. if I want to feed single lines of long text files to wdiff. Is there a recommended way to circumvent this, say by using pseudo files such as pipes to store the data temporarily without actually writing it to the disk (or writing it only if it exceeds a critical length). Note that wdiff takes two arguments and, as far as I understand it will not be possible to feed the data doing something like wdiff <"text".