As a simple example, let's say I'm using a PowerShell Step in a SQL Sever Agent job to check for the existence of a file.

If the file does not exist, how does the PowerShell Step signal to the Agent Job that the step failed so that Agent can retry the step according to the step's settings?

I could just let PowerShell loop and sleep until the file arrives but I want to use SQL Agent as it was intended and have it handle failure and success and retries and continue to this step on success or that step on failure, etc.

A throw will cause the job step to fail. In fact any exception which isn't handled will. See this post on Server Fault: Post

if (!(test-path c:\myfolder\myfile.txt))
{ throw 'file does not exist'}

I would probably go with a cmdexec (Operating System) job step and call regular PowerShell.exe, then use
System.IO.FileSystemWatcher + Register-ObjectEvent + Wait-Event rather than rely on Agent.