As François mentioned, in 1922 Kuratowski gave the first published example of a space and seed set $x_0$ such that the sequence $\lbrace x_i\rbrace$ is infinite, where $x_{i+1}=x_i\cap cl(cl(x_i)-x_i)$. An English translation of Kuratowski's paper is available here:
http://www.docstoc.com/docs/54437805/On-the-Topological-Closure-Operation
The following equations give a more detailed picture of why the sequence is infinite:
space = $\lbrace1,2,3,\ldots\rbrace$
topology = $\lbrace {\rm space}, \lbrace \rbrace ,\lbrace 1\rbrace ,\lbrace 1,2\rbrace ,\lbrace 1,2,3\rbrace ,\ldots\rbrace $
$x_0=\lbrace 2,4,6,\ldots\rbrace $
$cl(x_0)=\lbrace 2,3,4,\ldots\rbrace $
$y=cl(x_0)-x_0=\lbrace 3,5,7,\ldots\rbrace $
$cl(y)=\lbrace 3,4,5,\ldots\rbrace $
$x_0\cap cl(y)=\lbrace 4,6,8,\ldots\rbrace $
$\ldots$