Added below as this seems to confuse alot of people:
$ cat /etc/resolv.conf
# Generated by resolvconf
nameserver 127.0.0.1
It says for DNS resolution, use the localhost Pi-Hole dnsmasq daemon who is listening on all interfaces including the 127.0.0.1 loopback interface IP address.
Pi-Hole is not using this file, only local processes that invoke DNS, because Pi-Hole got its own upstream DNS servers configured for resolution.