If you have a look here; http://www.macromedia.com/devnet/coldfusion/articles/php_cfmx.html it's a PHP V CF document. JP
Cold fusion seems to me to be easier to implement. I also think the debugging is also better. But that might be because I have built a 150 sites in Coldfusion and 2 in PHP.
Coldfusion is really good for generating graphs and charts and pdfs and flash animations on the fly. Its very expensive software though whereas php is free.
Yes, you need ColdFusion web application server on the web server. The good new is that there is plenty of inexpensive hosting at places like crystaltech.com, hostmysite.com, and godaddy.com. All of these are in the $15 per month or less range.
The only downside to CF is that you have to pay for it. I like to think it pays for itself with the time it saves me.
At some hosts, ColdFusion costs $1.95. At bigger companies you hear, it's expensive but then they download some free tool like JBoss and hire three admins to support it. Nice (typical) code example.