PHP is designed to be embedded in HTML. That is why you must use the enclosing <?php ?> tags in all PHP scripts. Even when you run standalone php scripts from the the command line, you're literally embedding PHP in STDOUT.
This is very different from other languages such as ruby where templating uses the ERB module, which is a subset of the ruby language.
Considering PHP is more-or-less designed to be a templating language, I'd say it is. Partly.
On the other hand, PHP is a pretty good templating language. People should just learn to separate business logic from presentation logic.