I've setup apache + php + mysql on my home server.

The situation is, I have a small PHP chat script, which prompts the user to enter there name. When the user submits the form, the script calls itself and then check the "$action" veriable of the form to decide what to do next. THe problem is, that the login form is being displayed all the time, regardless of whether something is entered or not.

The only thing I can assume is that something in apache or php is not setup to allow variables and data to be transfered this way, instead I have to use $_POST[action].

What do I need to do to allow this function to work?

You should use the $_POST[] and $_GET[] super-variables. You can change this behavior in your php.ini file, directive register_globals BUT all newer versions of PHP have this turned off by default because of security.