Use Automator to run Python script when files added to folder

This isn't too difficult to do, you just need to know the right magic. I'll walk you through it.

1. Open Automator, and when prompted to choose a type for your document, select Service. If you're not prompted, just hit ⌘N to make a new automator file.
2. At the top of the rightmost panel, make sure that Output replaces selected text is checked, and the first drop-down is set to text:
   • You can change the any application part to a specific application if you only want it to work in that program.
3. In the Actions Library in the left panel, find Run Shell Script and double click it to add it to the workflow.
4. Change the Shell drop down to /usr/bin/python, and make sure that Pass input is set to stdin.
5. Delete the existing text in the script box, and replace it with the code below.
6. Save it with a descriptive name. Automator will save it in the ~/Library/Services/ folder.
7. Optional: Go to Keyboard Preferences, and find your service in the Services section of the Keyboard Shortcuts tab. You can assign a system-wide shortcut for it there.

Script Code

import sys

for f in sys.stdin:
    print f.replace('-', ' ').replace('%', ' ').replace('&', ' and ').replace('#', ' ').title(),

If you're creating a Service using RunShell Script which you want to pass the selected Folder(s) to the RunShell Script and have additional actions take place in the script on them, then start with these settings.

Create the Service:

1. Open Automator and select Service or File > New > Service If Automator is already open.

2. Set Service receives selected to folders and in to Finder.

3. Add a Run Shell Script Action, setting Shell: to /bin/bash and Pass input: to
   as arguments. This changes the default code to from cat to:
   

   for f in "$@"
   do
       echo "$f"
   done
   

Now you can use $f to act on the target Folder(s), e.g. cd $f and now you're in the directory of $f and can add additional code to act upon the files/folders within $f, etc.

Update:

Use the following working code as an example:

for d in "$@"; do
    cd "$d"
    for f in *.log; do    
        rm "$f"
    done
done

Within the Test and Test copy folders there were a number of .log files and files with other extensions as well. When the above code was run it deleted only the *.log files within the target folders as show in the images below using two folders or one folder and both files and folders with/without spaces in their names.