The configuration file

The configuration file (php.ini) is read when PHP starts up. For the server module versions of PHP, this happens only once when the web server is started. For the CGI and CLI version, it happens on every invocation.

php.ini is searched in these locations (in order):

SAPI module specific location (PHPIniDir directive in Apache 2, -c command line option in CGI and CLI, php_ini parameter in NSAPI, PHP_INI_PATH environment variable in THTTPD)
The PHPRC environment variable. Before PHP 5.2.0 this was checked after the registry key mentioned below.
As of PHP 5.2.0, the location of the php.ini file can be set for different versions of PHP. The following registry keys are examined in order: [HKEY_LOCAL_MACHINE\SOFTWARE\PHP\x.y.z], [HKEY_LOCAL_MACHINE\SOFTWARE\PHP\x.y] and [HKEY_LOCAL_MACHINE\SOFTWARE\PHP\x], where x, y and z mean the PHP major, minor and release versions. If there is a value for IniFilePath in these keys, then the first one found will be used as the location of the php.ini (Windows only).
[HKEY_LOCAL_MACHINE\SOFTWARE\PHP], value of IniFilePath (Windows only).
Current working directory (except CLI)
The web server's directory (for SAPI modules), or directory of PHP (otherwise in Windows)
Windows directory (C:\windows or C:\winnt) (for Windows), or --with-config-file-path compile time option

If php-SAPI.ini exists (where SAPI is used SAPI, so the filename is e.g. php-cli.ini or php-apache.ini), it's used instead of php.ini. SAPI name can be determined by php_sapi_name().

Note: The Apache web server changes the directory to root at startup causing PHP to attempt to read php.ini from the root filesystem if it exists.

The php.ini directives handled by extensions are documented respectively on the pages of the extensions themselves. The list of the core directives is available in the appendix. Probably not all PHP directives are documented in the manual though. For a complete list of directives available in your PHP version, please read your well commented php.ini file. Alternatively, you may find the » the latest php.ini from SVN helpful too.

Example #1 php.ini example

; any text on a line after an unquoted semicolon (;) is ignored
[php] ; section markers (text within square brackets) are also ignored
; Boolean values can be set to either:
;    true, on, yes
; or false, off, no, none
register_globals = off
track_errors = yes

; you can enclose strings in double-quotes
include_path = ".:/usr/local/lib/php"

; backslashes are treated the same as any other character
include_path = ".;c:\php\lib"

Since PHP 5.1.0, it is possible to refer to existing .ini variables from within .ini files. Example: open_basedir = ${open_basedir} ":/new/dir".