Steem Power is essentially STEEM that is locked-up in a thirteen week vesting schedule. What this means is that the STEEM cannot be liquidated at once, but in thirteen weekly withdrawals instead. As such, Steem Power represents a vested interest in the Steem ecosystem.
Holding Steem Power gives you the power to decide how the daily rewards of STEEM are distributed through upvoting or downvoting posts. Holders of Steem Power have a vested interest in the value of STEEM and are therefore granted this ability in proportion to how much Steem Power they have, in relation to everyone else.
In a nutshell, Steem Power is the currency needed to give rewards to posts of your choice. The more Steem Power an account holds, the more rewards it can give to posts. It also works as a bandwidth allocation token, giving you a calculated amount of network bandwidth in relation to how much of it you hold. See the Bandwidth FAQ on Steemit.
Project Owners who hold Steem Power can increase the amount of rewards distributed to their contributors apart from the Utopian bot’s votes or the support of sponsors. Holding Steem Power gives project owners a way to attract more valuable contributions by guaranteeing higher rewards.
Contributors who hold Steem Power can reward the posts or comments made by fellow contributors, as they interact with each other, further enriching the social aspect of Open Source contribution. It makes working on projects together fun and rewarding at the same time.