Firstly, it sounds as though Windows doesn't have an application set for opening a file with the extension .php. If that's the case, right-click and choose Properties, then hit the "Opens With" button. Choose Wordpad for now (unless you have a specific editor in mind). Apache and PHP are just to run the code, not to edit it. The code is simply text that you can create in any old text-editor.
Now, for installation:
Install Apache HTTP Server first. Go through the simple set-by-step, there's nothing fancy to do.
http://httpd.apache.org/download.cgi
Then go to the installation for PHP.
http://ca.php.net/get/php-5.2.5-win32-installer.msi/from/a/mirror
When it asks you for the Apache configuration directory, go to the directory in which Apache installed, and choose the "conf" folder ("C:\Program Files\Apache Software Foundation\Apache 2.2\conf" by default for Apache 2.2).
Make sure that Apache is started by either the icon in your tray (green arrow) or going to Start->Settings->Control Panel->Administrative Tasks->Services and finding the Apache service and making sure it's "Started".
Once you've done that, go to the Apache directory and find the htdocs directory. This is where you place your files. Any PHP files must end in the extension .php.
if you create test.php in the htdocs directory, paste this code
echo "Hello World!";
?>
Now open your browser and enter
localhost/test.php
If that does no work (the localhost alias isn't set for whatever reason), enter this to give the exact address
127.0.0.1/test.php
There you go.
Oh, and if you want to change the directory to something other than htdocs, go to the Apache conf directory and open httpd.conf and do a search for htdocs. You should get this
DocumentRoot "C:/Program Files/Apache Software Foundation/Apache2.2/htdocs"
You can change that directory to whatever you like. There's another line with this, so you'll have to do it twice.