Powder is simply paint applied by a different method. Just about all powder paints start out as a liquid, similar to spray paint. From this liquid state resin, and other various materials are mixed into the paint. From this paint its cured, converted into a solid, then ground (cyrogenically) to the desired level.
How it is applied
The powder is either sprayed or dipped where it clings to the metal surface by static electricity. From this point its baked where the powder melts, flows, and then cures and protects the surface.
The main characteristic of Powder Coating is that it is a great thermal and electrical insulator. This is great for certain applications but not for such things as cylinders and cylinder heads.
Another fact about powder coating is that custom colors are not cost effective, powder costs to much to make a specific color for one application.