$ mkdir x
  $ cd x
  $ echo aa > .y
  $ mkdir y
  $ echo aa > y/z
  $ echo aa > y/.z
  $ grep -r a *
  y/.z:aa
  y/z:aa

Notice that hidden files in the top-level (.y) don't show up, but those in subdirectories (y/.z) do.

It's kind of a gotcha. Fortunately one rarely finds dotfiles in subdirs.