Instead of this:

    # Do this  
    lyrics_set = set(lyrics_list) # Linear time set construction  
    words = make_wordlist()  
    for word in words:  
        if word in lyrics_set: # Constant time  
            print word, "is in the lyrics"

You could do this:

    lyrics_set = set(lyrics_list)  
    words = set(make_wordlist())  
    matched_words = list(lyrics_set & words)  
    for word in matched_words:  
        print word, "is in the lyrics"