Em ... yes ... you do need a server to interpret the PHP and send HTML to your browser. PHP is a server-side language (as opposed to JavaScript, which is predominantly used as a client-side language, although it doesn't have to be).
I suggest Apache - it's free, it works and the installation and configuration simply for checking whether your PHP works isn't enormously difficult. Another option is BadBlue, which includes an installation wizard. Win98SE does include PWS, I believe, but it's not perhaps the best choice for PHP.
HTH
Norm