A form is useless unless some kind of processing takes place after the form is submitted. The action attribute is used to inform the browser what page (or script) to call once the "submit" button is pressed.
Here, the action attribute tells the browser to send the form data to a form-handling PHP page (which will presumably convert the form data to something more email-friendly):
<form action="form-to-email.php" method="post"
<input type="text" name="txtname" id="txtname"/>
This element takes as its value a URL to a document that may be on the same server (for example, a shared CGI folder that has various form-processing scripts), or even a page or script on an entirely separate server (perhaps a free form-handling service).