After completing an installation using http://localhost/mydrupalsite you are unable to see the site. Instead, you are presented with a dialog box. If you are using Firefox, the box is called "Opening" which reads "You have chosen to open [blank space] which is a: PHTML file from http://localhost. What should Firefox do with this file?" etc.
The problem is caused by a misconfiguration of apache's php file handling. In your apache configuration file you should have something like:
<IfModule mod_php5.c>
AddType application/x-httpd-php .php .phtml .php3
AddType application/x-httpd-php-source .phps
</IfModule>
or (the following is the /etc/apache2/php5.conf from a custom Ubuntu LAMP set up):
<IfModule mod_php5.c>
<FilesMatch "\.ph(p3?|tml)$">
SetHandler application/x-httpd-php
</FilesMatch>
<FilesMatch "\.phps$">
SetHandler application/x-httpd-php-source
</FilesMatch>
# To re-enable php in user directories comment the following lines
# (from <IfModule ...> to </IfModule>.) Do NOT set it to On as it
# prevents .htaccess files from disabling it.
# <IfModule mod_userdir.c>
# <Directory /home/*/public_html>
# php_admin_value engine Off
# </Directory>
# </IfModule>
</IfModule>
If you are indeed on an UBUNTU system and the problem appears only if you try to access http://localhost/~userdir/ then most likely in the above file the part:
<IfModule mod_userdir.c>
<Directory /home/*/public_html>
php_admin_value engine Off
</Directory>
</IfModule>
has not been commented out! Commenting this part out and restarting apache (sudo /etc/init.d/apache2 restart) should solve the problem.
If still the problem persists then try opening your site using the local IP address http://127.0.0.1/mydrupalsite or http://127.0.0.1/~userdir/.
Sometimes you may have fixed the problem but you still need to clear your browser cache (or use another browser) before the site displays properly.