Torque vs horsepower discussions always bring up interesting and often false assumptions, generally because of the misunderstanding of how the two directly relate to each other. Torque is the ability to do (actual or potential) work, period. With a stallable power source such as an electric motor you can be producing torque, yet zero horsepower if you prevent the shaft from turning.
You can convert torque directly to horsepower and vice versa. If you look at the formula for calculating horsepower from torque here:
Horsepower - Wikipedia, the free encyclopedia
You will see that the torque mutiplied by the rpm is then divided by a constant, 5252. This should tell you one thing right away: At 5252 rpm, both torque (ft/lbf and horsepower numbers will be exactly the same, for any engine! Internal combustion engines for various reasons produce varying power at different rpms. If you graph the horsepower produced at a range of rpms, you get a power curve. If the engine produced a constant torque at all rpms, then more rpm = more horsepower. But the mechanical nature of the engine with all its inertial parts, rate at which fuel actually burns, rate at which you can draw in air and fuel and also expel the burnt mixture, etc usually ends up producing a power curve where maximum horsepower occurs at a specific rpm, and diminishes gradually on either side of that specific rpm. For the FB25 in our beloved Outback, the power curve reaches a maximum of 173 hp at 5600 rpm. This is the most power you'll get out of it.
If horsepower is the ultimate measure of available power, then why does torque matter at all? Well one reason is that we're talking about a car here, which starts and stops, and accelerates and slows down. For various reasons it is often not the best thing (and not the quietest...) to accelerate from a standing start with the engine revving at 5600 rpm. Reaching a higher torque output at lower rpms (as the FB25's design did in relation to the EJ25) does mean that more power is available sooner as the engine revvs up. Also, maximum power does not necessarily mean maximum fuel efficiency. Higher torque also gives you the ability to get a larger mass moving at all or accelerating for a given gear ratio. Any engine can move any mass with enough low gearing, but it is not always practical to design a vehicle that way.
Generally speaking, an engine with higher torque is best for accelerating from zero or low speed, or for getting a large mass moving. An engine with higher horsepower will be best for accelerating at high speed such as for passing a truck on the highway.
There are mechanical limitations with how you can smoothly accelerate from a standing start to a good speed with a constant rpm for maximum power (but if you could, that would give you the best acceleration times). This is where the CVT makes for such a compelling case, because now you
can do just that: accelerate in a linear fashion at a relatively constant rpm. The engine computer "knows" at which rpms you get the most power, and at which you get the most fuel efficiency. If you're willing to trade off some acceleration performance for better fuel efficiency, you can "tell" it that by gently pressing down on the gas pedal. Mash it down quickly and the computer will say "hey, fuel be damned...the boss wants horsepower now!".