You were using Write-Output which will write to the pipeline and in this case will not be displayed because your PowerShell console is locked while the $form.ShowDialog() is active.
However you can still do this! Write-host is another cmdlet for returning output and it can directly write to the PowerShell host window in real time. This is one of those rare times when you probably do want to use Write-Host.
Then, some small tweaks to make. Your event handler behavior should generally be defined before adding the $button to the $Form.
You made a function named Button_click, but you add the event handler like it is a variable. Here's how to do that instead, by making a variable which contains a {scriptblock}:
$button_click = {write-host "hi Sahar"}
And with that done, your code should look like this, and it will work as expected
$form = New-Object System.Windows.Forms.Form
$Button = New-Object System.Windows.Forms.Button
$Button.Location = New-Object System.Drawing.Size(35,35)
$Button.Size = New-Object System.Drawing.Size(120,23)
$Button.Text = "Show Dialog Box"
$Button.Add_Click($Button_Click)
$Form.Controls.Add($Button)
$form.showdialog()

$Button.Add_Click($function:Button_Click)after the function has been defined