The exponentiation operator ^ returns the result of a number raised to a power.
It is syntactic sugar for the POWER function, which is used underneath.
Any argument passed as a string is automatically converted into a number.
The following three expressions return the same result.

5 ^ 4
"5" ^ "4"
POWER ( 5, 4 )

Boolean values are converted into numbers (0 for FALSE and 1 for TRUE) when they are involved in an exponentiation.
Read BLANK handling in DAX for a complete description of the effect of BLANK with different operators.