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Because of the serious pollution in the modern power grid, power quality monitoring and control has become an urgent need to solve the engineering problem. With the application of time-frequency analysis theory of modern digital signal processing, some algorithms are proposed to monitor the disturbance signals like electromagnetic transient vibrating, electromagnetic transient shock, and short-term voltage changing signals in the transient-state power, as well as the harmonic signals carried by steady-state power. Simulation results show that the theory of time-frequency analysis based algorithms can not only analyze the frequency components, but also be able to accurately locate the signal in the transient time for each frequency component appeared, which achieves synchronous measurement for the signal in both time and frequency domain. By choosing a fast DSP chip, an on-line power quality monitoring system can be constructed, which provides significant foundation and basis for the further improvement of power quality.