I'm not sure exactly how the power meter in this machine works, but as somebody who works with power often, it seems fairly accurate to me. Probably not quite as accurate as, say, a power tap, but I get numbers accurate enough to work with over the winter months. My guess is it estimates power based on gear (resistance). and rpm, but im not entirely sure.
I don't know, but I would assume not. I didn't look much int the mechanics, but I think this was a magnetic resistance trainer with a motor that adjusted incline according to input from the computer. Most likely, power estimates are calculated, as like you say, real power meters cost as much as this unit. And remember, I had mine for ten minutes useful life plus all the rest of the time it took to send the whole defective shooting match back. OH, and Mine was LAST YEAR; 2011. Hate to bad mouth the company if they are making better stuff now. ;-)