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satt comments on The Triumph of Humanity Chart - Less Wrong
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Per Google/the World Bank, "Extreme poverty is defined as average daily consumption of $1.25 or less and means living on the edge of subsistence."
I would assume (but don't know) that the value is reasonably well calibrated, and seems absolute enough.
At worst, it's still probably a decent proxy for the number of people living near absolute subsistence level, and is certainly more useful than the much more relative poverty measures generally used (which are often little more than restatements of the GINI coefficient - that is, measurements of inequality rather than actual material need).
I spent a month in a farming village in China about 15 years ago. Farmhands there made about $8 a day during the growing season, and little during the winter. They would be supporting a family of 4 or more, so that would be under $2 a day on average. Yet prices for rent and food were so low that, if you considered only the essentials, they were making better wages than many people in America. They were poor if they wanted to buy manufactured goods, and poor in that certain standards (clean air, quiet neighbors, reliable electricity) were unavailable even for the rich. Most of them had indoor toilets (with nasty open sewers) and television (the true necessity). I don't know about the price of fuel or electricity.
My point is that using the exchange rate to compute how many dollars a day someone makes in a country in which the exchange rate is only used to price things that the locals don't buy is very misleading.
I believe the World Bank defines poverty in terms of PPP-adjusted incomes for that reason.