The kit needs an external power supply that can deliver 5V and up to 500mA. The actual current requirement for the board is much less than 500mA but in order to be able to power possible expansion boards this margin is needed.
The power can be applied to the board either via the USB connector or on pin 10 on the header J3. The USB connector is the preferred input because then it is possible to connect expansion boards on top of the J3 header.
The 5V is regulated down to 3.3V with an on board LDO regulator, which provides power to the entire board. Expansion top boards that require 5V will get this from the header J3 pin 10.