The port expander only uses a small amount of power when in use, but if you are powering it using the 3.3 V supply, then you will still only be able to draw a maximum of 50 mA in total from all the pins. If you draw too much power, then you may experience system freezes or corrupted read/writes on the SD card.
If you power the expander using the 5V supply, then you can draw up to the maximum power the expander can support (around a maximum of 25 mA per pin and 125 mA in total), as long as your USB power supply is powerful enough.
We must remember that if the expander is powered with a 5 V supply, the inputs/outputs and interrupt lines will also be 5 V and should never be connected back to the Raspberry Pi (without using level shifters to translate the voltage down to 3.3 V).
By changing the wiring of the address pins (A0, A1, and A2) on the expander chip, up to eight modules can be used on the same I2C bus simultaneously. To ensure there is enough current available for each, we would need to use a separate 3.3 V supply. A linear regulator such as LM1117-3.3 would be suitable (this would provide up to 800 mA at 3.3 V, 100 mA for each), and only needs the following simple circuit:
The following diagram shows how a voltage regulator can be connected to the I/O expander (or other device) to provide more current for driving extra hardware:
The input voltage (Vin) is provided by the Raspberry Pi (for example, from the GPIO pin header, such as 5 V pin 2). However, Vin could be provided by any other power supply (or battery pack) as long as it is between 4.5 V and 15 V and is able to provide enough current. The important part is to ensure that the ground connections (GND) of the Raspberry Pi, the power supply (if a separate one is used), the regulator, and the I/O expander are all connected together (as a common ground).