PHP (officially "PHP: Hypertext Preprocessor") is a server-side HTML-embedded scripting language.
Simple answer, but what does that mean? An example:
Example 1-1. An introductory example <html>
<head>
<title>Example</title>
</head>
<body>
<?php echo "Hi, I'm a PHP script!"; ?>
</body>
</html>
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Notice how this is different from a CGI script written in other languages like Perl or C -- instead of writing a program with lots of commands to output HTML, you write an HTML script with a some embedded code to do something (in this case, output some text). The PHP code is enclosed in special start and end tags that allow you to jump into and out of PHP mode.
What distinguishes PHP from something like client-side Javascript is that the code is executed on the server. If you were to have a script similar to the above on your server, the client would receive the results of running that script, with no way of determining what the underlying code may be. You can even configure your web server to process all your HTML files with PHP, and then there's really no way that users can tell what you have up your sleeve.