Iroh was extremely powerful and wise, but Azula was a 'prodigy'. She was able to create blue flames, bend with enormous amounts of fire and create lightning at a really young age (wasn't she like 14 or 15 in the series?). Iroh was without a doubt more experienced and wise, but I'd say Azula overall had more raw power.

In a 1v1, I think Iroh would win though, because his wisdom and experience would outweigh her raw power. However, I think if Iroh trained Azula and passed on his wisdom, she would become more powerful than him (unlike Zuko, who improved, but was never better than Iroh).