What does "Chayil" refer to in this Pasuk?
Ramban: It refers to the battles that they are about to fight with the Kena'anim, whom they are destined to vanquish because they are a mighty nation. 1
Targum Onkelos and Targum Yonasan: It means 'this property.' .
Why does the Torah mention Yisrael's strength here?
Ramban: The Torah is warning Yisrael here that, when they fight with the Kena'anim - and defeat them, they should not ascribe their victories to their own prowess, but rather recall how Hashem delivered them from the Egyptians - against whom they themselves were helpless, and how He provided for them in the desert - even though they were totally unable to fend for themselves. 1
Ramban: In which case they should realize that, when they will have fought the Kena'anim too, it was Hashem who gave them the strength to defeat them, and that, if they forget Hashem, they will perish just as the Kena'anim perished.