How php compiles the source code ?

PHP compiles source code into Zend Engine bytecode - this is done by the Zend
compiler in zend_language_scanner.l, zend_language_parser.y and
zend_compile.c. This code is the executed by the opcode engine in
zend_execute.c and zend_vm_execute.h. The latter is generated from
zend_vm_def.h by means of the script zend_vm_gen.php.

For  a good intro to php internals there is a presentation in french 
http://julien-pauli.developpez.com/tutoriels/php/internals/presentation/

I saw it via this thread on php internals