I think you might have a keiki from a Dendrobium, not a phal. I could wrong though. I have only been growing for three years.

Generally, you are supposed to remove the keiki from the main plant with sterile pruners or a sharp knife. For your keiki, this should where the top and the bottom canes meet. Then you would pot the keiki up in its own small pot (just big enough to hold the roots and keep the plant from falling over) with the media of your choice (bark mixed with sphag moss or what have you).

I would like to hear what others think about the long root that has been growing in water. If it is put into bark now, will it die?