Well, you'll need a web server, with PHP configured into it... and most likely you'll want to install MySQL locally... although, it may be possible for you to access a remote database.
Apache, in my opinion (and probably most of the people here) is by far the best web server out there. Some people get scared by the text file type configuration, i.e. no GUI, but once you get to know it you'll appreciate the power of not having to navigate through various menus and tabs and such. Also, PHP and Apache integrate very well together. They are both projects of the Apache Software Foundation. You could get away with using IIS, if you must, but it's highly recommended that you stay far far away from it... mainly because of the many security holes, but also because it's a resource hog and won't perform as well as Apache. You shouldn't even consider using PWS.
For more information see http://apache.org, http://php.net, and http://mysql.com.
