The surname Phillips and its many variations are believed to be patronymic surnames, which mean they were originally derived from the male first name Philip or Phillip. Adding an "s" to the end of Philip or Phillip causes the name to mean "son of Philip" or "son of Phillip."
The website Behind the Name states that the first name Philip or Phillip is from the Greek: "Philippos", a compound of "philein", to love, and "hippos", horse. Hence, "lover of horses" or "friend of horses."
One of the first recorded spellings of the Phillips surname with a "Ph" is shown to be that of Alicia Philippes, which was dated 1273, in the "Hundred Rolls of Huntingdonshire", during the reign of King Edward I, known as "The Hammer of the Scots", 1272 - 1307.
Philip of Macedon, the father of Alexander the Great, was a famous bearer of the Philip forename. The popularity of the name Philip throughout Greece and Asia Minor and subsequently in western Europe was probably due to him. The name was eventually borne by five Kings of France; this includes Philip the 1st who reigned from 1060 to 1108. The forename Philip migrated to England via France in the 12th century and became popular. Early on it appears as "Filippus" in the Documents relating to the Danelaw, Lincolnshire, dated 1142, and as "Philipus" in the Gilbertine Houses Charters of Lincolnshire, circa 1150. Henry Phelipe, noted in the 1273 Hundred Rolls of Norfolk, was one of the earliest recorded bearers of the surname in England with a "Ph" spelling, along with Alicia Philippes and Ellis 'fil' Philip of Huntingdonshire. For patriotic reasons, Philip ceased to be popular in England as a given name after the reigns of Mary and Elizabeth. Nevertheless, its earlier predominance has given it immortality in British directories. Source: Directory of English & Welsh Surnames by Charles Bardsley.
Because Philip was a popular first name in medieval Europe, it was imported into Wales quickly and became numerous by the late 13th century as Phelip, which was abbreviated as Phe: in early records. By the 15th century, it was found in small numbers in several parts of Wales, but it was mainly concentrated in the southern areas, especially Gwent and Morgannwg, where it reached 3%. Since it averaged 1% for all Wales, it was bound to form a significant modern surname by the patronymic route. The variant spellings of the surname are many, such as Philip, Philipp, Philipps, Philips, Phillip, Phillipp and, of course, Phillips. In Wales, Philipps was the chosen spelling of a well-known family of Picton Castle in Pembrokeshire; however, they did not adopt this spelling consistently until the 18th century, after which it was considered rather grand and sometimes copied by humbler families. Clergy and clerks frequently spelled the forename Phillip in the 18th century, thus leading to the predominance of Phillips in modern families. Philps and Philpin are other variants of Philip, chiefly found in Pembrokeshire, though some may be of southwest English origin. From 1813 to 1837, this surname was found across Wales but was far more common in the south than the north and more common in the west than in the east. Source: The Surnames of Wales, by John & Sheila Rowlands
Early examples of the name in Scotland are Rauf Philippe, a Berwickshire landowner, who figures in the Ragman Roll of 1296; Robert Phillope who was sheriff clerk of Dunfries in 1629; and James Philip of Almerieclose, who was author of the Graemiad, an epic poem in Latin on the Claverhouse campaign of 1689. In the south, the name can be connected to Phelps or Phipps; in Scotland, the shortened form is Philp. This version was and is particularly common in the region of Fife. Stephen Philp was bailie of Newburgh in 1473, and Sir James Philp was curate at Abdie around the same time. John Philp was abbot of Lindores from 1522 to 1560. The pleonastic (redundant) form MacPhillips is also found but the commoner version is MacKillop, both of which are associated with Clan McDonnell of Keppoch. Source: Scottish Surnames by David Dorward
In modern times, Phillips, an English name, has to some extent taken the place of Philbin, the Irish diminutive of Philip. With the prefix 'Mac', it is found in Cavan and Monaghan and there it is usually a branch of the Scottish clan MacDonnell of Keppoch. MacPhilbin is the name of one of the hibernicized branches of the Connacht Burkes which formed a sept of the Irish type. O'Donovan says there were two branches, one in Mayo and one in Co. Galway. Of those Danish families that immigrated to Ireland, some took Irish surnames and more of them added the prefix 'Mac' to their names, as did many of the Anglo-Norman and English families in earlier times. Some branches of the De Burgo (Burke, de Burgh) family of Connaught took the surname MacWilliam and some of them that of MacPhilip. The De Burgo (Burke, de Burgh) name is one of the most important and most numerous of Hiberno-Norman names. First identified in Connaught, it is now numerous in all the provinces (least in Ulster). Source: The Surnames of Ireland by Edward MacLysaght
With a few exceptions, hereditary surnames, the last names passed down through the males of a family, didn't exist until about 1000 years ago. While it may be hard to believe in today's hustle and bustle, surnames just weren't necessary before that. In a world that was much less crowded than it is today - a world where most folks never ventured more than a few miles from their place of birth and every man knew his neighbor - first, or given names, were the only designation necessary. Surnames became a necessity when early governments introduced personal taxation. In early England, this was known as Poll Tax. During the centuries that followed, surnames have continued to develop, leading to astonishing variants of the original spelling. Source: Last Name Meanings & Origins by Kimberly Powell, About.com
When considering the origins of the Phillips surname along with the DNA analysis of over 400 men named Phillips or some variation of Phillips, it becomes obvious a great many unrelated men who had fathers named Philip or Phillip adopted some variation of the surname Phillips (meaning son of Philip or Phillip) as permanent surnames gradually came into general use in Europe from 1000 AD to 1800 AD.