The system folders contains

Web Server
The web server is a single file server and it is really small, only 60KB in size. (shttpd.exe v1.42)
When clicked on, it will start and go to systray. There is where you can shutdown and exit the web server.
Click on "start.bat" in the /root folder to start the "shttpd.exe" server with PHP support.

PHP
The PHP version installed is a stripped down PHP version 5.4.9. This is the last 32 bit version that will work on Windows XP and Vista, but it will work on all Windows verson.
Extensions installed are: curl, mysql, mysqli, sqlite3 and pdo_sqlite.

SQLite
SQLite features are not developed yet, but it will be used for saving revisions of edited text and also create a simple Blog feature.

MySQL
The MySQL version supported is a portable MySQL version (separate download)

Delete before creating a distribution ZIP
You can delete the /system folder i you don't need PHP and MySQL.
You can also deltete folders /sysinfo, /templates, /res/tinymce
This will shrink the "Portable Offline Web Server" ZIP file to 2.5 MB and you will still have a viewable portable website.