Perfect Shield is the official term when one uses a shield just in time. There is no "exact" way to perform the Perfect Shield technique. In order for the technique to be executed, one must rely on timing and skill. When the opponent is ready to strike, the player must quickly use the shield. If done correctly, the character takes no damage and has a proper moment to perform a counter attack while the attacker is still recovering. When used, any incoming attack is blocked with no damage done to a character's shield. The Perfect Shield technique in SSBB is comparable to a parry in traditional fighting games, as it results in little to no knockback and freezes the opponent for a couple frames.
The Perfect Shield is done by quickly and fully depressing L or R so that the incoming attack is inside the character's shield. If done correctly, there will be a significant sign on the shield and a distinctive (though somewhat hard to hear) sound. If the timing is slightly off, then the attack may be blocked by a light shield, a normal shield, or it may not be blocked at all. Because it is technically a shield, it is ineffective against grabs.
CPU players, especially level 9s, use this technique a lot. Human players don't use it as much simply because of the reaction times and precision usually required. As such, it often comes as a surprise and can momentarily disrupt a match.
The name Powershield comes from a bonus awarded in Melee for performing several in a row. A Dojo update has given this technique the name "Perfect Shield". [1]
Something not completely understood is how Yoshi's egg shield sometimes powershields attacks even when the shield is already up.
The powershield reflects projectiles. There is a distinctive noise (different than powershielding) when this happens, and the character's shield brightly flashes. However, unlike the Reflector, the damage when reflecting projectiles is reduced by half.
<youtube>http://www.youtube.com/watch?v=LAbMhYmSy6Y&feature=rec-HM-r2</youtube>