A "crunchy" system might be D&D: feats, stats, lots of detailed combat options, weapon stats, etc.
A "smooth" or "non-crunchy" system might be Risus, where your character sheet would look like: Incendiary Wizard (5d), Not My Fault (2d), Talking Skull (3d) -- and that's the sum total of it. Roll your dice against a target, try to succeed, you're done.
Lots of stuff sits somewhere along the continuum between (and beyond -- some stuff's crunchier than D&D) those two.
Crunch does mean "power", in the sense that systems with crunch tend to provide you lots of rules whereby you can escalate your character's power over time. More power means more rules stuff you can bring to bear. So the terms have gotten blended.
