Generally

With a Power of Attorney an individual acting as a principal  empowers an agent to act on the principal's behalf generally in matters of a financial nature. The agent selected must be trustworthy as the agent is empowered to handle the principal's assets. It is only effective during the principal's life. The principal can revoke the Power of attorney at any time as long as the principal remains competent. For many people a Power of Attorney is an important legal document which can save them and their loved ones from  complications and expense in a variety of situations. One of the most important features is its ability in many cases along with a Living Will to avoid the expense and emotional issues inherent in starting a  legal action for Guardianship against an obviously incompetent spouse or parent. 

There are a variety of different kinds of power of attorney.

General vs. Limited

A general Power of Attorney allows the agent to do virtually anything of a financial nature that the principal can do. A limited Power of Attorney limits the powers of the agent to specific powers.

Durable Powers of Attorney

The incapacity or incompetence of the principal generally revokes the  Power of Attorney unless it contains language addressing the disability of the principal. A  Durable Power of Attorney can either contain language providing that the Power is effective immediately and remains effective upon the disability of the principal or the that the Power is effective only upon disability. Each has distinct advantages.

Generally A  Durable Power of Attorney which is effective immediately will usually be recognized by third parties in dealing with the agent. One that becomes effective only upon disability may be questioned by third parties as to whether the principal is disabled--but usually must be accompanied by a report of the principal's treating physician stating that the principal is disabled.