Appleton was given permission by Blackpool to speak to Rovers on Thursday about the possibility of replacing Henning Berg, who was sacked a fortnight ago after just 10 games in charge.
Former Portsmouth boss Appleton has himself only been in the Blackpool hotseat for two months, having arrived at Bloomfield Road in November to take over from Ian Holloway.
With Blackburn set to confirm Appleton as their new boss before Friday night's Championship trip to Wolves, Phillips admitted the prospect of working under another new manager came as a shock to him and his Blackpool team-mates.
The forward told the Football League Hour on Sky Sports News Radio: "It is a big surprise to the players. When we reported for training on Tuesday, the manager wasn't in, which raised a few eyebrows amongst the lads because he hasn't missed a single day since he has been here.
"It (Blackburn's approach) broke on Sky Sports on Wednesday night and then Thursday, he wasn't at training and we heard he could be on his way to Ewood Park, which came as a big surprise and a shock to everyone."
Phillips, who will be 40 in the summer, admitted he wants to stay in the game when he retires and refused to rule out the possibility of taking charge at Blackpool.
He said: "I would certainly look at it.
"Whether it would be as a player-coach, I don't know. I want to stay in the game, so if it was presented to me, I'd certainly look at it and give it my full attention."
Whoever takes charge, one of the new manager's first tasks may be to address the future of winger Thomas Ince, who has been linked with a move to Liverpool this month.
Phillips, though, believes the 20-year-old should remain at Bloomfield Road at least until the end of the season.
"I'd like to see him stay and continue to learn his trade because I think it will benefit him in the long run," said Phillips. "He still has a lot to improve upon and learn.
"Last Saturday's game (at Fulham in the FA Cup) was a good test against Premier League opposition and I think he found it a little bit more difficult than he thought it would be.
"Another six months certainly would not do him any harm. If he finishes the season as strongly as he started it, then he will certainly get get his move in the summer."
Listen to Sky Sports News Radio's Football League Hour here, with Mikey Burrows and Dean Windass joined by Phillips, new Plymouth boss John Sheridan, MK Dons captain Dean Lewington and Doncaster new boy Lee Fowler.