If you're running Apache on your machine, and you want to test your files, you don't really need to set up a "testing server" per se, as once your files have been saved, they have automatically been "uploaded" in a sense.
The default directory for Apache files during installation is:
c:\program files\apache group\apache2\htdocs\
If you're saving your files in there, then you don't need to set up a testing server. If you're trying to test before you make them live, then you need to set up a different directory under this one (so Apache can still find it and parse it properly) - like "test".
Then under your testing configuration, set your testing server folder to:
c:\program files\apache group\apache2\htdocs\test\
And your URL Prefix is http://localhost/test/
Of course, these settings depend on where you have Apache installed and where you have set it to point to find the PHP and HTML files.
hth
-Elizabeth