FTP and Power
Training with a power meter is much like training with a heart rate monitor. You need a reference point and, based on that reference, personal zones are set up. Then workouts are prescribed using those zones. With a heart rate monitor the reference point is your lactate threshold heart rate. I describe how to find this heart rate reference point in my books, especially the latest--Total Heart Rate Training.
The reference point for power comes from the work of Andy Coggan, PhD. He calls it Functional Threshold Power (FTP). FTP is the power you would average with your highest possible effort during a 60-minute race. Once you know your personal FTP you simply use Andy's system to find your zones as described in Hunter Allen's and Coggan's book, Training and Racing With a Power Meter:
Zone 1 <55% (active recovery)
Zone 2 56-75% of FTP (endurance)
Zone 3 76-90% of FTP (tempo)
Zone 4 91-105% of FTP (lactate threshold)
Zone 5 106-120% of FTP (VO2max)
Zone 6 121-150% of FTP (anaerobic capacity)
Zone 7 >150% of FTP (neuromuscular power)
The key to all of this is discovering your FTP, and making sure it's current as your power changes relatively quickly, at least as compared with heart rate which hardly changes at all over the course of a season. Expect FTP to change about every four to eight weeks as your training load increases or decreases.
There are many ways to find your FTP. My favorite is simply to have the athlete complete an all-out, solo 30-minute time trial which is NOT part of a race. I've found the average power for this 30-minute, solo effort to be quite close to what the athlete does in a 60-minute race, such as a 40k time trial. The reason is that when riding alone you'll feel sorry for yourself and not go as hard as you would should it be a 30-minute race where you are held accountable to the world for your results and motivation is therefore considerably higher.
Allen's and Coggan's book describes several other ways of finding your FTP. And it's a great reference for understanding other aspects of power-based training.