PHP sessions logging in and logging out

I worked on your code and made many changes. I tried to add lots of comments to make it more easy to understand. Hopefully there are no syntax errors, but I couldn't actually test is since I don't have the MySQL databases and such.

Here is your main code:

<?php
//When you are developing and testing, set the error level as high as possible.
//This will help you find problems early. A well written program will have no errors and warnings, ever.
error_reporting(E_ALL | E_STRICT);

//Starting the session should be one of the first things your code does, and should only be done once.
session_start();

require 'config.php';

if(isset($_POST['logout']))
{
    //I don't think there is any reason to check if username is set. If you are logging out, just destroy.
    session_destroy();

    //Also unset the session username since session_destroy() does not affect existing globals.
    unset($_SESSION['username']);
}
//I changed this to elseif, because there should not be a condition where you are logging out and checking for a login.
elseif(!isset($_SESSION['username']))
{
    //You should not assume that variables are set, because accessing them if they are not set
    //will cause a warning. I've added isset().
    if(isset($_POST['username']) && !empty($_POST['username']) && isset($_POST['password']) && !empty($_POST['password']))
    {
        //You absolutely MUST escape your strings or you are at risk of SQL injection.
        //Use mysql_real_escape_string() for this.
        $username = mysql_real_escape_string($_POST['username']);
        $password = mysql_real_escape_string($_POST['password']);
        $result = mysql_query("SELECT * FROM members WHERE username ='$username' AND password = '$password'");

        //You should probably check that the value === 1 here.
        //I'm assuming it should always be 1 or 0.
        if(0 === mysql_num_rows($result))
        {
            $_SESSION['username'] = $username;
        }
        else {
            echo "Fail :(";
        }
    }
    //If you put an else statement here, you could print an error for if the username was not specified.
}

//You should not have SQL queries in your template, so I moved this here.
//Notice that I'm just setting $posts to the data. It's best to just pass
//the data, and format it in the template.
$result = mysql_query("SELECT * FROM posts ORDER BY post_id DESC");
if($result)
{
    $posts = array();

    while($row = mysql_fetch_array($result))
    {
        $posts[] = $row['post'];
    }
}
else
{
    $posts = false;
}

//Try to separate code logic from templates.
//Your program is small, so it's not that important, but I would do it anyway.
require 'template.php';
?>

Here is your template code, which should go in a new file called template.php:

<div id = "container">
    <h1>#HookyGear Bay</h1>
    <div id = "login">
        <?php if(!isset($_SESSION['username'])) {
                echo '<div id = "accountBox">
                        <form name="input" action="index.php" method="post">
                            Username:<input type="text" name="username" /> Password:<input type="password" name="password" />
                            <input type="submit" value="Sign In" />
                        </form>
                </div>';
            }
            else {
                    echo "<div id='accountBox'>You Are logged in as ".$_SESSION['username']."
                    <form name='logout' action='index.php' method='post'>
                    <input type='submit'value='Reset' name='logout'/>
                    </div> ";
            } ?> 
    </div>

        <div id = "content">
            <?php

            if(false !== $posts)
            {
                foreach($posts as $post)
                {
                    echo '<div class="blogPosts">'.$post.'</div>';
                }
            }
            else { ?> 
                <div class="blogPosts"><?php echo "no blog posts"; ?></div> 
            <?php
            }
            ?>

            <div style="clear:both;"></div>
        </div>
</div>