The PHP License has a couple clauses that are incompatible with the GNU GPL (versions 2 and 3) because they restrict usage of the name "PHP". Usually a name is protected using a trademark. When it is done in the license however, this introduces new requirements, and those requirements are not in the GNU GPL. So, despite the fact the PHP _License_ is a free software license, and a permissive one, it is not compatible with the GNU GPL.
This is not a problem for the PHP language itself, because the GNU GPL makes an exception for a project's underlying programming language (this exception allows you to distribute GPL'd applications that works for MS Windows, for example).
The real issue is when the PHP License, which is meant for the PHP programming language only, is used for other works. Many such works come from the PEAR libraries (http://pear.php.net/).
In short: don't use PEAR packages under the PHP License with your GPL'd applications, or urge their maintainer to switch the modified BSD license, which is very similar except for the "trademark" clauses. mBSD is also compatible with the PHP License, so such code may be included in the PHP distribution if need be. It is worth noting that trying to preserve the PHP name in a separate software package has no effect, so those clauses are pretty useless in the context of PEAR.
Note: there has been some progress: http://savannah.gnu.org/task/?8427#comment6
Here are the relevant clauses (http://www.php.net/license/3_01.txt):
3. The name "PHP" must not be used to endorse or promote products derived from this software without prior written permission. For written permission, please contact firstname.lastname@example.org. 4. Products derived from this software may not be called "PHP", nor may "PHP" appear in their name, without prior written permission from email@example.com. You may indicate that your software works in conjunction with PHP by saying "Foo for PHP" instead of calling it "PHP Foo" or "phpfoo"
I approached the PEAR developers to raise awareness of this issue (independently of Savannah): http://thread.gmane.org/gmane.comp.php.pear.devel/40682/focus=40682
This had some good results, with some packages relicensing: http://thread.gmane.org/gmane.comp.php.pear.devel/40682/focus=40682
However not everybody understood the point. Among them one of the PHP maintainers, who confused "derived work" and "aggregation". His answer was also quoted in the FAQ (without a link to the rest of the discussion). This is unfortunate for the PHP maintainer, because it was a pretty inaccurate statement: http://pear.php.net/manual/en/faq.devs.php
Attemping to reason with the FAQ maintainer failed: http://pear.php.net/bugs/bug.php?id=9630
Not all packages can be relicensed anyway, because there is no formal copyright assignment, so each and every author would have to be contacted - which is the main difficulty of the process.
An interesting question at the time was to know whether the GNU GPL v3
would be compatible, or not. After some talk with
firstname.lastname@example.org, it appears that the
latest draft isn't compatible with the PHP License, and is not moving in
that direction. (\<\
There was another confusion because the FSF pages mentioned version 3.00 of the PHPL, but there was a new 3.01 which fixed other distribution issues pointed out by Debian. The FSF pages are now updated to mention 3.01 - and the changes have no effect on the compatibility issue (http://lists.gnu.org/archive/html/savannah-hackers-public/2006-12/msg00023.html).
So, the PHPL and the GNU GPL are not compatible and aren't going to be. We encourage PEAR developers to switch to the modified BSD and fix the PEAR FAQ.
Answer sent by email@example.com (with no action from PEAR): http://thread.gmane.org/gmane.comp.php.pear.devel/42589
Other reference: [gnu.org #327077] PHP License and GPLv3 compatibility
Obsolete issue, don't confuse: at a point near the introduction of PHP4 there was a problem with the PHP4 and Zend licenses, which lead several projects (including Savane) to stick to PHP3. This issue was solved long ago and must not be confused with the PEAR one above. More information at http://osdir.com/ml/org.fsf.france.general/2002-09/msg00007.html ("PHP4 / PHP3" by Loic Dachary).