Use GD functions to create image. For example like this(taken from php.net):
<?php
header ("Content-type: image/png");
$im = @imagecreate (50, 100)
or die ("Cannot Initialize new GD image stream");
$background_color = imagecolorallocate ($im, 255, 255, 255);
$text_color = imagecolorallocate ($im, 233, 14, 91);
imagestring ($im, 1, 5, 5, "A Simple Text String", $text_color);
imagepng ($im);
?>
Save it. It acts just like normal image so you can make <image src=myimage.php> to show it.