As others have said, this is an archaic usage, but more than that, it's a usage that was particularly common in poetry or song where words are sometimes modified slightly to fit a particular rhythm. Your quoted sentence is a line from a 19th century English poem called "The Soldier's Dream" by Thomas Campbell, which is set in a very rigid rhythm (technically, "headless anapaestic tetrameter").
If you read the poem out loud, you'll discover every line ends with an accented (strong) syllable. If the word "overpowered" were pronounced normally, it would end with a weak syllable: "o-ver-POW-erd". Contracting that final 'e' with an apostrophe emphasizes the fact that, in order to keep the rhythm of the poem, you need to pronounce the "power'd" part of the word as if it were one single, strong syllable: "o-ver-POWRD."
This convention was quite common at one point in English poetry and hymn writing and goes back at least to Shakespeare.