Php is a software program. You run it, provide some input, it produces output, same as pretty much every other software program. In php's case the output is (hopefully) HTML.
That's all there is to it, really. 🆒
Seriously, the answer to your question depends on many things. Do you know what cgi is? Do you know what an Apache module is? Do you mean "what is an interpreter"? Or are you talking about HTTP? Or web servers and dynamic content in general?