Do file_get_contents and readfile execute PHP code?

file_get_contents and readfile do not execute code. All they do is return the raw contents of the file. That could be text, PHP code, binary (e.g. image files), or anything else. No interpretation of the files' contents is happening at all.

The only situation in which it may appear as if execution is happening is:

1. <?php ?> tags will likely be hidden by the browser because it's trying to interpret them as HTML tags, so this may lead to the impression that the PHP disappeared and hence may have been executed.
2. You're reading from a source which executes the code, e.g. when reading from http://example.com/foo.php. In this case the functions have the same effect as visiting those URLs in a web browser: the serving web server is executing the PHP code and returning the result, but file_get_contents merely gets that result and returns it.

Those functions are described in the «Function Reference / File System Related Extensions / Filesystem» section of the manual, while function to execute code are described at «Function Reference / Process Control Extensions».

I'm pretty sure the misunderstanding comes from a somehow widespread confusion between file system and network and that's made worse by the PHP streams feature that provides protocol wrappers which allow to use the same functions to transparently open any kind of resources: local files, networks resources, compressed archives, etc. I see endless posts here where someone does something like this:

file_get_contents('http://example.com/inc/database.inc.php');

... and wonders why he cannot see this database connection. And the answer is clear: you are not loading a file, you're fetching a URL. As a result, code inside database.inc.php gets effectively executed... though rather indirectly.