The actual power held by the board of directors varies widely from company to company. In some companies, the board of directors form a powerful body to which senior management is subservient. Other times, the board is a formality which merely rubber stamps decisions of the CEO and senior management.
The board is run by the chairman of the board who may or may not be an employee of the company. In larger companies the board is partitioned into several committees with specific tasks. For example, a compensation committee is commonly formed to make decisions regarding salary and stock allocations for top management (and sometimes for the entire employee pool). Others might include a legal affairs committee, and a mergers and acquisitions committee.
It is widely considered good management practice to create a board of directors with persons with expertise from diverse backgrounds and to have outside directors who can provide a perspective on a situation which is independent from management.