Power tiers are a simple enough idea, in theory. They are explained at length in
GURPS: Powers, but a summarized version can be found here.
Basically, powers from higher tiers cannot be affected by powers from lower tiers. For instance, divine invisibility cannot be broken by Mortal invisibility-sensing glasses, Greater fireballs blast through defenses offered by Superior spells, and Cosmic teleportation ignores Exceptional dimensional locks. There are exceptions; minions summoned with Greater powers are still subject to damage from Mortal spells, for instance. To figure out how two powers interact, determine which is the "sword" and which is the "shield"; that is, which effect is trying to stop the other effect. If the "sword" has a higher tier than the "shield," the "shield" is ignored.
Mundane effects are largely outside this tier system. All mundane defenses protect against all effects which they apply to. Even a god's fire can be put out by water (unless it's self-oxygenating like white phosphorous), a god's invisibility can be stopped by heat-vision goggles (unless the god's invisibility specifically lets IR light through), and a bacteria shielded by a demon lord can still be bested by antibiotics (unless immune). The exception is Cosmic abilities.
The tiers are:
Tier 0 (Cosmic)--Reserved mostly for Overgods and the like (or simulating an ability that significantly exceeds its normal limitations), Tier 0 powers are capable of ignoring basically any defense except another such power. Unlike other tiers,
this includes mundane defenses--a Cosmic attack ignores mundane armor (including any defense bonus it would have given), a Cosmic healing spell can cure incurable diseases, and a Cosmic mind-reader can read the minds of those behind lead sheets. (Base: +50%)
Tier 1 (Divine)--Only the gods themselves can possess abilities of this tier, and only the big ones; the Flying Spaghetti Monster is out, although Jehovah, Thor, and Aphrodite might. Divine abilities overcome all barriers save those set up by gods and those imposed by the natural world. (Base: +40%)
Tier 2 (Greater)--Very, very little can have an ability in this tier. Gods, lesser and greater, make up the majority, but powerful angels, demons, spirits and the like
may qualify, as would greater gods when slightly out of their domains. (Base: +30%)
Tier 3 (Exceptional)--Exceptional abilities are essentially unheard of among mortal beings; only truly magical beings can possess abilities like these. Examples include mighty spirits and such. (Base: +20%)
Tier 4 (Superior)--Very rare among mortals, but not unheard-of for those with
exceptional training or gifts. Archmages and high priests might have this ability, as might less human beings more in tune with magic. Superior effects can overcome Mortal defenses (though not Mundane ones). (Base: +10%)
Tier 5 (Mortal)--The default. Most powers will fall into this category. (Base: +0%)
Tierless (Mundane)--Abilities derived wholly from natural laws, rather than paranatural ones. The distinction between this and Mortal abilities can be hard to determine, but in general asking if it can be negated by an antimagic field or similar effect determines this. (Base: +0%)
The "Base" value is the value of the Enhancement required to buy an ability of the tier, usually. Double this if it's an attack with a lingering effect that can't be stopped except by a higher-tier ability (or Mundane ones), such as a disease incurable by lesser mages or a fire which can't be stopped with cold magic;
hextuple it if it's an attack that weaker defenses (armor, DR, flat-out immunities) have no effect on.
Usually, PCs cannot take anything but Mortal or Mundane abilities without GM consent (or
very good reason).