The answer is that you don't need all the power all the time. Yes, the "real" power of the Prius is the power of its engine alone, and that's why its speed limit is relatively low : it corresponds to the maximum speed available with the engine power only, on a level road. But during normal driving the actual power you need fluctuates enormously, from high (positive) values to negative values, when you need to slow down the car or are driving downhill, so that you rarely use the maximum power of any car.
Think about a fluctuating curve that represents this power, as a function of time. Now smooth it, to erase the sharpest peaks and fill in the gulfs. If you remove from the peaks as much as you put in the gulfs, you haven't changed the total mechanical energy needed for the trip. But considering that the engine has better efficiency when it's operating smoothly, with few RPM variations and low or high rotations, you will actually use less gas. That's what grandmas are doing usually, compared to youngsters who drive more agressively.:wink:
Now can you make the engine think you're driving like a grandma while you're still quite young ? :idea: Simple, if you've got a Prius. During decelerations, you will store energy in the battery, that otherwise would be wasted (transformed into heat). That's for the lowest part of the power curve. Or even during cruising sometimes, the engine will deliver more power than necessary and one part of it will charge the battery, because doing so will make the engine operate in a better efficiency zone. Now when you need maximum power, the engine will not deliver all the power, instead some power will come from the battery. Of course this can not last forever, since the battery capacity is limited. But in everyday driving bursts of maximum power are usually quite short and you will never see an "empty" battery if you don't race with your car.
Furthermore, smoothing the engine power demand has other benefits : you can use an Atkinson cycle engine, which is thermodynamically more efficient but not good at producing high power, and therefore not used in conventional cars (or combined with a supercharger to compensate for this weakness). And if you combine mechanics and electricity you can make a CVT which is totally different from conventional CVTs, without any clutch or torque converter and achieves great efficiency.
What the Prius proves, is of course not that you can create energy from nothing, but that most cars are really wasting too much energy. 8)