PHP is a programming language that runs on web servers. It is used primarily to dynamically create web pages. It can process the entries from a form and output them to a web page, it can also read and write to files and databases contained on the web server.
It's dynamic, meaning it changes websites based on certain events and data, which makes for a more interesting and more dynamic website, than a website that is written in pure HTML and so it completely static and never changes unless manually changed (which is done much less than updating a PHP website I can tell you that.)
PHP runs on the server rather than on the client's machine and then delivers the polished product (web code) to the client for viewing. Unlike Java which runs on your machine, PHP is done before anything hits your machine. I think the term is Server-Side, but I'm just throwing that phrase out there. I think it's like ASP or something. It's very useful, though if you want to keep stuff DYNAMIC. Also, as a language, it's pretty cool just the way it works.