For a development environment, you need a web sever (i.e. Apache - most common, or IIS), database server (i.e. MySQL) and PHP (Scripting language).
The easiest way to set all that up is to use something like XAMPP (Apache, MySQL, PHP, and Pearl. This does all the heavy work installing all of these for you, and includes some extra tools to make it easier to manage.
You can find XAMPP here:
There are some graphical installation instructions for XAMPP here:
When you enter a URL like localhost/ it will take you to the webroot of the web server running on your local machine. So if you had your files in a folder called C:\xampp\htdocs\testwebsite, you would use the URL:
In your browser to access the website.