While going through a Zend tutorial, I came across the following statement:
Note that the php_flag settings in .htaccess only work if you are using mo
Your server needs to have the php modules installed so it can parse php code.
If you are on ubuntu you can do this easily with
sudo apt-get install apache2
sudo apt-get install php5
sudo apt-get install libapache2-mod-php5
sudo /etc/init.d/apache2 restart
Otherwise you may compile apache with php: http://dan.drydog.com/apache2php.html
Specifying your server OS will help others to answer more specifically.