The file should be a PHP file, so test.php.
Then maybe something like this:
<html>
<head>
<title>Test</title>
</head>
<body>
<input type="text" name="test1" value="<?php echo htmlspecialchars($_GET['test1'], ENT_QUOTES); ?>">
</body>
</html>
The reason it stays blank in your example is because there is no PHP code to put the value into the field. It isn't automatic. Also, on most servers (but not always), a file with an .html extension will not be parsed by PHP.
Also, passing it to the htmlspecialchars function will help prevent cross-site scripting.