This example shows how PHP code is embedded inside an HTML file using PHP tags. First, the PHP tag <?php opens and a variable $name is set to 'Alice'. Then the PHP tag closes with ?>. Next, HTML code starts with an h1 heading. Inside the heading, PHP tags open again to echo the value of $name, which outputs 'Alice'. Finally, the heading closes and the file ends. PHP tags tell the server where PHP code starts and ends inside HTML. Without closing PHP tags, the server would treat the rest of the file as PHP code, causing errors. This method lets you mix PHP and HTML to create dynamic content.