Nodejs is an event driven system that runs your Javascript single threaded. That means that in order for things to work properly, you cannot hog the entire CPU in a while() loop (or any other kind of loop) unless the loop directly contains an await statement that is awaiting an actual promise tied to an asynchronous operation.

This is a basic principle of programming in nodejs and you have to learn how to structure your program logic into the event driven world. You don't show what you're really trying to do, but "polling" anything in a tight loop is generally not the correct way to program an event driven system.

So, in the code you show here:

const net = require('net');

net.createServer(socket => {
    socket.setEncoding('utf-8');
    console.log(socket);
}).listen(4242, '127.0.0.1');

console.log('do some while logic here')
while(true) { }

Your while loop just spins forever and never allows any events to get processed and therefore your server can never get events about incoming connections. The events will just pile up in the event queue, but you never give nodejs a chance to go back to the event queue to process those events. To do so, you must finish what you're doing and return control back to the system (thus why you can't use the while(true) { } loop).

So, you really need to be thinking event-driven programming in nodejs. You set up event listeners and you execute code some time in the future when those events occur. You can artificially create events with setTimeout() or setInterval(), but doing that constantly or with really, really short time durations is just polling and is not an efficient way to program a nodejs server either.

If you show or describe for us what you're really trying to do in the rest of your code, we can advise the most important part of this question which is how to actually write that code in an event-driven fashion.

I repeat, learning how to program in an event-driven fashion is required for an efficient, scalable nodejs server process.

This happens because your socket creation is not an instant process. It needs to make system calls and so on. In other words, it is asynchronous. The way javascript works are that it has main loop and callback queue. Basically the main loop is what is executed and callback queue is the things that await to be executed (See MDN docs on this https://developer.mozilla.org/en-US/docs/Web/JavaScript/EventLoop).

What happens in your case is that your callback goes to the callback queue and waits to be executed, but it never gets to do so, because your main loop is blocked by while (true) {} loop. If you want nonblocking behavior you need to send things that are inside you while loop to callback queue instead. One of the ways to do it in javascript is to use setTimeout. E.g.

const net = require('net');

net.createServer(socket => {
    socket.setEncoding('utf-8');
    console.log(socket);
}).listen(4242, '127.0.0.1');

console.log('do some while logic here')
function main() {
    // do something here
    setTimeout(main);
}
main()

This way you're not going to have a stack overflow issue and you get nonblocking behavior in you while loop.