Penn State is not what I would consider a "dominating" team. They are very, very good. Given that the season is almost complete, I checked the stats, which should be a decent barometer at this point:
https://sports.yahoo.com/ncaaf/stat...tedTable=0&leagueStructure=ncaaf.struct.div.1
On offense, Penn State is quite a ways down in PPG. They're below Pitt and Georgia, and comparable to TAMU and North Carolina, and a bit better than Navy. On defense, Penn State is very good in points allowed - at #7 in the nation, just above Oregon and below tOSU (#1), Texas, Tennessee, and Ole Miss. PSU is 5th in the nation in total yards allowed per game.
As much as people seem to crab about specific defensive players screwing up and whatnot, the unit as a whole seems to be getting the job done. The offense isn't bad either, they score enough (except against tOSU, but again, remember that tOSU is #1 nationally, defensively) to get the job done.
On paper, I think Penn State can go toe to toe against anyone. There are certain teams that are going to cause problems (I think it's more of a positional mismatch issue, e.g. - lack of WR corps on Penn State's part). This team also seems to be able to put themselves in a position to win (see USC and Minnesota, not so much tOSU although you could argue they were mere inches away from tying the game). Staying healthy is a big deal.
All that said, Penn State's journey through the playoffs is going to be like going through a minefield. We all need to be ready for a rough ride!