Yes, and that is addressed in this FAQ entry..
http://www.dew-code.com/content/view/14/25/
The file named "directory" is the actual script, it just lacks the .php file extension
The included .htaccess (not the one in /admin) tells your web server to treat the "directory" file as a PHP script.
Depending on your version of Apache and how it is configured, the syntax in the .htaccess file will be different
For my server it's
ForceType application/x-httpd-php
for yours it might be
SetHandler application/x-httpd-php
You can try each variation by un-commenting one directive at a time in the .htaccess file and refreshing your web browser.
The FAQ link above also has other options that might work for you.