Why should we separate PHP from HTML

The best practice is not to seperate PHP from HTML, the best practice is to seperate logic from markup.

Also important is coding style. Proper line indentions. Using echo "</div>"; instead of echo"</div>";, valid HTML, not putting variables into quotations:

echo "The variable contains the string $rand";

better (why? see my comment below):

echo "The variable contains the string ",
     $rand,
     " :-)";

Your whole project gains much quality and worthness just by improving the code, writing clean, readable, maintainable. Imagine you want to change the Text, you would have to add or change lots of echoes.

Code Style Guides > Pear, PSR, Zend <

encourage developers to keep their code readable, valid and cross-browser compatible

The problem is not performance, it's about readability and more importantly, maintainability.

Doing all the processing in one place, and all of the output in another (i.e. Logic and Presentation), would mean you will have an easier time altering one without affecting the other too drastically.

To your specific question, the top method is preferable by far, for the reasons listed above.