It stands for "power deviation." While most explosions in X-COM do static amounts of damage at the origin (and decrease with radius), some start with a variable damage, so this can be used to create those types of explosions. An example would be the original UFO Power, which you'll see explodes for 215 +/- 35 damage (anywhere from 180-250).
Is there any control of how big the decrease in damage is?
I thought of some explosions that are very strong in the center but their area damage falls off very quickly to some very low damage at the end.
To some extend that might be approached by a projectile with high impact damage and a low damage explosion, but it wouldn't be the same as something where you can vary the damage using radius and the percent of damage at the end.