Simply put, a power of attorney is a document that gives another person (the agent) legal authority to represent you and act on your behalf.
There are many reasons to need a POA - some of them are:
In most states, for a POA to be official, it will need to be Notarized by a Notary Public. A Notary will be present to witness signing of the document(s) and to verify identity of the signers. Once it has been properly notarized, it is then and official document.
Witnesses aren't always required - you will have to check your particular POA to see if witnesses are necessary for your document. If you need to have witnesses, the best type of person to be a witness is someone not related to anyone mentioned in the document. The best witnesses are a family friend, neighbor or co-worker.
A Notary Public will be present during the signing of the document to verified it was signed by the correct people and that those signers have been properly identified by verifying their Drivers License, State issued ID, or Passport. Once this has been done, the Notary's stamp and signature on your document makes it complete. NOTE: an Notary is NOT an Attorney and therefore can not give legal advice or opinion on your document.
If a valid identification is present for one reason or another - expired, lost, not available - a Notary can verify a person by having other people witness their identity. If your document requires witnesses and they also know the signer personally, they can then also be considered a creditable witness for the person that does not have a valid identification.