Physical power is a derived stat which affects combat damage, and the effectiveness of some talents. It is compared against the target's physical save when using a physical talent; if the attacker's physical power is in a higher tier than the defender's physical save, the Off-balance cross-tier effect (global speed -15%) will be inflicted.
Physical power is a rescaled stat with diminishing returns. So, a weapon that adds 10 to physical power may increase the effective stat by less than 10, depending on what tier the stat is currently in.
Physical power is influenced by Strength, by weapon-specific talents, and by equipment bonuses.