It's pretty smart. When you're in call and the proximity sensor is triggered the standby button doesn't respond. Also, on a handset this big a power button on top would require you to adjust the way you hold the phone every time you need to press it. When it's in the middle of one of the sides you can press it without adjusting, no matter whether you're left-handed (index finger) or right-handed (thumb).
I dunno if this is just me, but doesn't the design have a major flaw here, being the placement of the power button? Doesn't it fall right where most people would put their hands when they are on a phone call?
Maybe I'm not holding it correctly!
My Xperia T also has the power button on the right side and I vastly prefer it over the top placement on my Xperia S. The only downside is that you sometimes press the power button when you want to change the volume while watching a movie on your phone in the dark