Bluehost sent me an email forcing me to update to php 5.4. I did not update it and the server updated automatically. Suddenly found out site is down completely because of messed up php.ini and .htaccess settings. None of the pages loaded and .php files are never executed properly. I had some html files to run as php but nothing worked.
Finally one line in .htaccess or in cpanel apache handler fixed everything and site came up and running. woohooo!
AddHandler application/x-httpd-php5s .php .do
Added this line above to cpanel apache handler and everything got fixed!