Attention! str_ireplace does not destroy multibyte characters. But multibyte characters are not replaced case-insensitively. 

<?php
echo  str_ireplace('Ä', 'Ae_', 'Ägypten');  // Ae_gypten
echo  str_ireplace('ä', 'ae_', 'ägypten');  // ae_gypten
echo  str_ireplace('ä', 'ae_', 'Ägypten');  // Ägypten
echo  str_ireplace('Ä', 'ae_', 'ägypten');  // ägypten
echo  str_ireplace('E', 'e_', 'egypt');  // e_gypt
echo  str_ireplace('e', 'e_', 'Egypt');  // e_gypt
echo  str_ireplace('ä', 'ae_', mb_strtolower('Ägypten'));  // ae_gypten

Here's a different approach to search result keyword highlighting that will match all keyword sub strings in a case insensitive manner and preserve case in the returned text. This solution first grabs all matches within $haystack in a case insensitive manner, and the secondly loops through each of those matched sub strings and applies a case sensitive replace in $haystack. This way each unique (in terms of case) instance of $needle is operated on individually allowing a case sensitive replace to be done in order to preserve the original case of each unique instance of $needle.

<?php
function highlightStr($haystack, $needle, $highlightColorValue) {
     // return $haystack if there is no highlight color or strings given, nothing to do.
    if (strlen($highlightColorValue) < 1 || strlen($haystack) < 1 || strlen($needle) < 1) {
        return $haystack;
    }
    preg_match_all("/$needle+/i", $haystack, $matches);
    if (is_array($matches[0]) && count($matches[0]) >= 1) {
        foreach ($matches[0] as $match) {
            $haystack = str_replace($match, '<span style="background-color:'.$highlightColorValue.';">'.$match.'</span>', $haystack);
        }
    }
    return $haystack;
}
?>

here's a neat little function I whipped up to do HTML color coding of SQL strings. 

<?php
/**
 * Output the HTML debugging string in color coded glory for a sql query
 * This is very nice for being able to see many SQL queries
 * @access     public
 * @return     void. prints HTML color coded string of the input $query.
 * @param     string $query The SQL query to be executed.
 * @author     Daevid Vincent [[email protected]]
 *  @version     1.0
 * @date        04/05/05
 * @todo     highlight SQL functions.
 */
function SQL_DEBUG( $query )
{
    if( $query == '' ) return 0;

    global $SQL_INT;
    if( !isset($SQL_INT) ) $SQL_INT = 0;

    //[dv] this has to come first or you will have goofy results later.
    $query = preg_replace("/['\"]([^'\"]*)['\"]/i", "'<FONT COLOR='#FF6600'>$1</FONT>'", $query, -1);

    $query = str_ireplace(
                            array (
                                    '*',
                                    'SELECT ',
                                    'UPDATE ',
                                    'DELETE ',
                                    'INSERT ',
                                    'INTO',
                                    'VALUES',
                                    'FROM',
                                    'LEFT',
                                    'JOIN',
                                    'WHERE',
                                    'LIMIT',
                                    'ORDER BY',
                                    'AND',
                                    'OR ', //[dv] note the space. otherwise you match to 'COLOR' ;-)
                                    'DESC',
                                    'ASC',
                                    'ON '
                                  ),
                            array (
                                    "<FONT COLOR='#FF6600'><B>*</B></FONT>",
                                    "<FONT COLOR='#00AA00'><B>SELECT</B> </FONT>",
                                    "<FONT COLOR='#00AA00'><B>UPDATE</B> </FONT>",
                                    "<FONT COLOR='#00AA00'><B>DELETE</B> </FONT>",
                                    "<FONT COLOR='#00AA00'><B>INSERT</B> </FONT>",
                                    "<FONT COLOR='#00AA00'><B>INTO</B></FONT>",
                                    "<FONT COLOR='#00AA00'><B>VALUES</B></FONT>",
                                    "<FONT COLOR='#00AA00'><B>FROM</B></FONT>",
                                    "<FONT COLOR='#00CC00'><B>LEFT</B></FONT>",
                                    "<FONT COLOR='#00CC00'><B>JOIN</B></FONT>",
                                    "<FONT COLOR='#00AA00'><B>WHERE</B></FONT>",
                                    "<FONT COLOR='#AA0000'><B>LIMIT</B></FONT>",
                                    "<FONT COLOR='#00AA00'><B>ORDER BY</B></FONT>",
                                    "<FONT COLOR='#0000AA'><B>AND</B></FONT>",
                                    "<FONT COLOR='#0000AA'><B>OR</B> </FONT>",
                                    "<FONT COLOR='#0000AA'><B>DESC</B></FONT>",
                                    "<FONT COLOR='#0000AA'><B>ASC</B></FONT>",
                                    "<FONT COLOR='#00DD00'><B>ON</B> </FONT>"
                                  ),
                            $query
                          );

    echo "<FONT COLOR='#0000FF'><B>SQL[".$SQL_INT."]:</B> ".$query."<FONT COLOR='#FF0000'>;</FONT></FONT><BR>\n";

    $SQL_INT++;

} //SQL_DEBUG
?>

If you follow the instructions given here you will end up with code which works in php5.3 but which bugs-out in php5.4. Reason is that '&$count' (explicit pass by reference) is now an illegal construct.
Nasty, especially it leads to unreliable code which may work on test but not in production. Manual needs corrected!

FIX-ed problem with highlighting second 'o' OR 'a', in this string

<?php
function highlight_string ($haystack, $needle, $highlight_class) {
         // return $haystack if there is no highlight color or strings given, nothing to do.
        
        $first_encode='XXXXXXXXXXXXXXX';     //ENCODE string

        $second_encode='YYYYYYYYYYYYYYY';
        
        preg_match_all("/$needle+/i", $haystack, $matches);
        if (is_array($matches[0]) && count($matches[0]) >= 1) {
            foreach ($matches[0] as $match) {
                $haystack = str_replace($match, $first_encode.$match.$second_encode, $haystack);
            }
        }
        
        $haystack=str_replace(array($first_encode,$second_encode),
array('<font class="'.$highlight_class.'" >','</font>'),$haystack);
        
        return $haystack;
}
?>

This functionality is now implemented in the PEAR package PHP_Compat.

More information about using this function without upgrading your version of PHP can be found on the below link:

http://pear.php.net/package/PHP_Compat

For function work with cirilic

setlocale (LC_ALL, 'ru_RU');

For highlighting without the overhead of regex and without destroying capitalization, try this:

<?php
function highlight($needle, $haystack){
    $ind = stripos($haystack, $needle);
    $len = strlen($needle);
    if($ind !== false){
        return substr($haystack, 0, $ind) . "<b>" . substr($haystack, $ind, $len) . "</b>" .
            highlight($needle, substr($haystack, $ind + $len));
    } else return $haystack;
}
?>

This example uses HTML bold tags, but you can easily change the highlighting method.

This function will highlight search terms (Key Words in Context). 

The difference between this one and the ones below is that it will preserve the original case of the search term as well. So, if you search for "american" but in the original string it is "American" it will retain the capital "A" as well as the correct case for the rest of the string. 

<?php
function kwic($str1,$str2) {
    
    $kwicLen = strlen($str1);

    $kwicArray = array();
    $pos          = 0;
    $count       = 0;

    while($pos !== FALSE) {
        $pos = stripos($str2,$str1,$pos);
        if($pos !== FALSE) {
            $kwicArray[$count]['kwic'] = substr($str2,$pos,$kwicLen);
            $kwicArray[$count++]['pos']  = $pos;
            $pos++;
        }
    }

    for($I=count($kwicArray)-1;$I>=0;$I--) {
        $kwic = '<span class="kwic">'.$kwicArray[$I]['kwic'].'</span>';
        $str2 = substr_replace($str2,$kwic,$kwicArray[$I]['pos'],$kwicLen);
    }
        
    return($str2);
}
?>

Note that character case is being defined by your server's locale setting, which effects strings containing non-ASCII characters.

See strtolower() - http://www.php.net/strtolower and comments - internally str_ireplace converts $search and $replace to lowercase to find matches.

Warning with highlighting ...

I used :

<?php
$text = preg_replace('/('.$q.')/i','<span class=highlighting "">$1</span>' , $text);
?>

Because this line do not allow to highlight uppercase and lowercase correctly (transform uppercase to lowercase for exemple)

<?php
 $text = str_ireplace( $q , '<span class=highlighting "">'.$q.'</span>', $text);
?>

But when $q contain some regex you have some problems ... for exemple :
<?php $q = '('; ?>

So you must use preg_replace to highlight correctly the text and you must create a function for escape bad regex caracters !

I think that a better function can be found but this works I guess :

<?php
function regex_escape( $q )
{
    return preg_replace('/([\[\]\(\)\{\}\-\.\*\?\|\^\$])/', '\$1', $q);
}
?>