Still have no fucking clue how to "turn on the power"...the repeated prompting from the game isn't exactly a throbbing clue...
But yes. Zombies are made of win.
The power lever is located in the back room behind the stage - if you open the first door on top of the stairs to the right, you would need to open three more doors to get to the room with the power lever. The power allows you to operate automatic gun turrets, zombie traps, and most importantly initialize and use the time machine.
It's important to get one (or two) of the ray guns from the random box - you can then use the time machine to go up to the film room above the theater and "upgrade" your weapon through the 'pack-o-punch' for 5000. Also there is a juggernaut beverage, I'd strongly recommend getting near the back entrance to the theater.
Just be aware that once you turn on the power you unleash these little crawling, disgusting things that sometimes you can't see - and they'll give off some kind of gas that will blind you for a few seconds.