Unzip it into the '/wp-content/plugins/' folder of your Wordpress installation resulting in a '/wp-content/plugins/php_execution/' folder.
Login as administrator and activate the plugin.
Wordpress' tag balancing has to be turned off. It is by default. If you have enabled tag balancing, turn it off again by unchecking "WordPress should correct invalidly nested XHTML automatically" in Settings>>Writing of the admin section.
Optionally set PHP execution permissions in the Settings>>PHP Execution panel. By default all administrators possess the permission to execute php code.
As javascript code is added to the editor, you have to clear your browser cache !!! Otherwise the plugin won't work as the code added by it simply won't get executed. For information on how to clear the browser cache, follow this link.