The power valve changes the exhaust port timing with engine RPM. At lower RPMs it makes the piston travel farther down the cylinder before the exhaust port is opened, which improves low end power. As the RPMs increase the power valve rotates, exposing the exhaust port earlier in the stroke to give the exhaust more time to exit the cylinder, which is required for higher RPMs.
It is not unusual to have the exhaust goop leaking out from the ends of the power valve shaft. It is possible for this goop to clog things up and cause the power valve to jam, which can mess up either the top end or or bottom end power depending on what position it jams in.
Rod