I'm new here so this might not be completely correct, but to power up turns Steem into Steem Power. In doing this you are increasing your Vests, or interest in the Steem community. The more Steem Power you have the greater your voting power will be. As in when you vote you will see a difference from your vote. To power down currently take 104 weeks or 2 years. With the new hard fork that will be released soon this will change from 104 weeks down to 3 months, I believe 12 weeks. So the concept of a power down is turning Steem Power into Steem.
To convert into fiat you need Steem (STEEM) or Steem Dollar (SBD) then you would go to an exchange such as Poloniex and conver to bitcoin etc. The Steem Power can not be sent to the exchange it can only be stored on your account or powered down to Steem.
This at least is my best understanding of the process. I hope this helps you out.

Steem On!