Power cages are for free-weight exercises, they give you more freedom of movement as the barbell is not restricted like it is on a smith machine. This requires you to keep the weight balanced which engages your stabiliser muscles, muscles that will not be activated while using a smith machine.
Smith machines allow you to rack the barbell at any point during the lift by a simple twist of your wrist, whereas, on a power rack, there is no way to secure the bar mid rep.
You can still squat safely using a power rack as you can set the horizontal safety bars at a specific height so you can drop the weight at the base of your squat without it coming down on you.