> I believe the reason cat gets interrupted when we press Ctrl+C is that the Linux kernel on the server side receives this \x03 character, recognizes that it means “interrupt”, and then sends a SIGINT to the process that owns the pseudoterminal’s process group. So it’s handled in the kernel and not in userspace.

Also interestingly, the use of \x03 for this purpose is a default, but it's not hardcoded. You can change it with the stty command.

For example, if you run

stty intr '^X'

then your interrupt character sequence will be Ctrl+X instead of Ctrl+C (!).

In order to make this change, the stty program actually has to call into the kernel with an ioctl call (TCSETS or a related ioctl, for "terminal control set settings").

You can learn more about this ioctl on Linux in the ioctl_tty(2) man page, and you can see the various settings that can be changed this way with

stty -a

(It's a little bit confusing which things are handled by the readline library and which things are handled by the kernel, as the kernel's ability to support some rudimentary line-editing features on an interactive terminal long predates libraries like readline. I think readline might actually disable kernel interpretation of some of these control characters when it starts accepting input, and then re-enable them when it stops, but I've never looked into that.)