This hasn't been mentioned, but it appears that PHP opening and closing tags are required to be part of the code snippet.
<?php highlight_string("<? \$var = 15; ?>"); ?>
works, while
<?php highlight_string("\$var = 15;"); ?>
does not. This is unforunate for those of use who want to show tiny code snippets, but there you go. Earlier versions of this function did not have this requirement, if I remember correctly.