CUE sheets are plain text files (with the filename extension ".CUE") which contain extra information about songs - mostly just simple details like the filename, Title, Artist, Album, etc. They are detected and read automatically by Poweramp's music scanner. For more information on the CUE format, see https://en.wikipedia.org/wiki/Cue_sheet_(computing) . They broadly work in two ways:
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CUE files often point to one very large disc image file - such as an entire ripped CD - and they serve to provide index points to determine which sections of the file need to be separated into individual songs. When Poweramp reads this sort of CUE file it creates a 'pseudo folder' which contains all of the individual songs, and it also places these songs inside their relevant Album, Artist, etc categories.
This kind of CUE file is important and should always be copied along with the large audio file, otherwise you will only see one very big song rather than any individual tracks. If for some reason you would like to see those large overarching files too though, you can enable Settings > Library > Lists > Show CUE Disc Image Files. Note: it is possible, although not common, for CUE data to be embedded inside FLAC audio files directly, rather than requiring separate sidecar files. - Sometimes CD ripping software generates multiple audio files, one for each song, but it still creates a reference CUE file which points to each of those audio files in turn. This type of CUE file is redundant, as the individual songs will already be scanned and added to Poweramp's Library anyway, based on their embedded tag data. It's probably better to delete this type of CUE file manually.
If you never wish to use CUE sheets at all, but you don't want the hassle of deleting unnecessary files, you can prevent the scanner from checking them by disabling Settings > Library > Scanner > Parse CUE Files.