Powershifting is an advanced trick to improve the amount of sustained damage you can do in cat form. When you're out of energy in cat form you can't use your special attacks; no Shred, no Mangle, no Rip. You can just wait for more energy; 20 energy every 2 seconds. Or you can switch out of cat form and back in, using your Furor talent to instantly generate 40 energy. Shifting regularly to improve DPS is the art of powershifting.
The energy isn't free. It costs 829 mana to make the shift and it takes time and attention to shift at the right moment. Is it worth it? According to Toskk's model, powershifting every cycle (every 12 seconds) gives you 10% more DPS. More realistically, powershifting every second cycle (every 25 seconds) yields 5% more DPS. That's a significant improvement.
Since patch 2.3.2 it's become much easier for druids to shift forms quickly. In fact, powershifting can now be done very swiftly with a single command:
/cast !cat form
That's it, a tiny macro. The ! tells the macro to always go into cat form, not to toggle. Ie, you're shifting from cat form to cat form and WoW is kind enough to give you 40 energy for doing it. Because it's a single command it's lightning fast; apparently you won't even miss a melee swing. There's also no risk of being caught in caster form. I believe it still triggers a 1.0 second global cooldown. And even though it's fast, timing still matters. You don't want to powershift if you have 20+ energy. I save it for when I'm down below 10.
So is powershifting worth it? I think so, at least if you have the time to pay attention to your energy bar and think when to powershift. I put this macro on my attack bar right next to my other specials. I
don't even think of it as shifting forms anymore, it's more like
an instant cast spell to turn mana into energy. Now that I'm fully comfortable with my cat DPS rotation I find myself with enough spare time to think about it.
I'm still a n00b at powershifting; lots more detail for me to learn in this Elitist Jerks thread.