This entity is not in the game by default, but got left over in the FGD.
item_paint_power_pickup is a point entity available in Portal 2. This entity is in the FGD, but not code. It was most likely related to
weapon_paintgun. Because it was removed, its exact functionality isn't known, although it likely would have behaved like the paint cans in Tag: The Power Of Paint, enabling the use of different paint types when picked up. When placed in Hammer, the entity appears as a health kit from Half-Life 2, and includes a "Paint Type" keyvalue, with a description labeling it as "the paint power of the pickup".