Eating a newt corpse occasionally raises your current Power, with the message "You feel a mild buzz". If your current Power is less than or equal to 2/3 of your maximum, you will always receive the increase; otherwise the chance of receiving it is 1 in 3.
If you do get an increase, your current Power will be increased by between 1 to 3 points. If this increase would raise you above your total maximum Power, the maximum is increased by 1, and current Power is set to maximum. 
Newts are featured prominently in Dudley's dungeon, often as creatures which kill Dudley. Strips featuring newts killing Dudley are rated poorly and are called "newt jokes". A reference to this phenomenon can be seen on the high score list of NAO: Adeon holds fourth rank, but has been killed by a newt.
A newt is a species of salamander. The increase of power when eaten is probably a reference to the Shakespeare quote of the encyclopedia entry—"eye of newt" is named as a spell component in the incantation by the witches in Macbeth. This is thought to be a cryptic name for the mustard seed rather than a reference to the literal eye of a literal newt.
(kinds of) small animal, like a lizard, which spends most of
its time in the water.
"Fillet of a fenny snake,
In the cauldron boil and bake;
Eye of newt and toe of frog,
Wool of bat and tongue of dog,
Adder's fork and blind-worm's sting,
Lizard's leg and howlet's wing,
For a charm of powerful trouble,
Like a hell-broth boil and bubble."