Powder Coating Explained
Powder coating is, technically, a spray painting system, but it's very different from standard spray-booth applications. Powder coating sprays dry powder, rather than a mist of wet paint. The powder sticks to the object you're painting because it is electrostacially charged. Once the dry paint is applied, it is baked in an oven where the powder melts and evens out, before cooling and hardening.
Abrasion Resistance
Traditionally, since powder coating increased in popularity, manufacturers have looked to powder coating as the tougher of the two options. Generally, this remains true, but paint manufacturers have continued to develop better and harder paints -- some of which may rival powder coatings' toughness. In particular, some two-part paints developed for aviation and marine use can be extremely durable. If you have an application such as painting an airplane, the large size may make powder coating an unrealistic option; while facilities to spray large objects are not hard to come by, large-scale powder coating baking ovens are. So, for toughness, powder coating generally trumps paint, but for large applications, some of the newer paints are far more practical.
Aesthetics
It's easy to see paint's superior aesthetics at any collector car show. High-end, professional paint jobs use wet paint. A base layer or primer is first applied, which can be sanded to remove imperfections. Then, one or more coats of colored paint are applied, often with light sandings between coats. With wet-paint systems, the aesthetics really come from multiple layers of clear-coat. The clear finish is sprayed, then dried, then sanded, before the process is repeated. A collector car may get a dozen or more coats of clear paint, each sanded and polished, giving the paint the appearance of depth as well as a mirror-like finish.
Complex Shapes
In addition to being tough, powder coating, because it is a dry application, is less prone to paint runs. It's not used for exterior auto paint because it's harder to get a beautiful finish. If you're painting something with a tricky shape, like the tubular frame of a motorcycle, wet-spraying is very difficult if you wish to avoid runs. This is where powder coating really excels. The dry pigment will stick evenly to the sides and bottoms of objects with much less likelihood of runs when the finish is baked on.