The special guitar that is being developed for Power Gig: ROTSS is a fully functioning real electric guitar produced by First Act (company known for making beginner-level musical instruments). It is 2/3 the size of a normal electric and uses a special string dampener that will hold the strings in place to prevent them from actually ringing out during gameplay. The dampener can be removed and the guitar will function like a normal electric guitar when plugged into an amplifier.
In-game, the guitar will have two modes. On the neck of the guitar are colored frets similar to Guitar Hero and Rock Band. In the normal mode, colored frets will appear onscreen and you have to play that fret on any string. In advanced mode, the colored frets will also include a number telling you which string you have to play. It isn't nearly as advanced as Rock Band 3's Pro Guitar mode, but it is certainly a step up from typical plastic instrument music games.