Yes, it is standard 5 button gameplay compatible.
However, it will not work for Rock Band 3 pro guitar mode.
It doesn't support RB3's pro mode. The way it works in Power Gig is that the first five frets are the equivalent of the five buttons when you use it as a game controller, and then frets 7-11 act as solo buttons.
The result is that the sound the guitar makes when you strum doesn't sound anything like the song you're playing. Apparently you need a rubber muter for the strings too, or the game will read the continued vibration of the strings as you constantly strumming. The guitar works as a real guitar, but when you're using it as a controller, it's regular five-button gameplay.