The power valves on a modern two stroke change the size of the exhaust ports.
At low rpm, there is less port area, for more low end power. When they open up, the exhaust ports are larger and flow more, for more high end power. Powervalve systems have been common on 125 and 250 MX race bikes since the early 1980's.
Different bikes have different designs. On some bikes (like the '00 CR250) there is an inspection plug on the side of the cylinder. On that bike, you can verify the operation of the valves by removing the plug, revving the bike in neutral and seeing if the shaft that operates the valves rotates. Not sure if your CR125 has an easy way to verify powervalve operation.
If the bike pulls strong on top but has no low rpm or mid range power, it COULD be the powervalve is stuck open. It could be overdue for service, or something came loose, stripped or is not aligned in the parts that open and close the power valve.
You might want to get an original Honda service manual for your bike. They are expensive, but excellent.