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The walls in mty bathroom are drywall. there are a few small holes and some places where the paint has peeled off and you can see the cardboard of the drywall. I would like to patch the holes and then put a thin layer over the peeled area before I repaint. A few months ago I had a contractor come and fix one of the bedrooms. He used something called compound. my dad always used plaster. What is the proper and correct product for me to use ?

Joint compound.
Sand the wall area to both remove loose material, and will also give you a smoother/clean surface. Wide blade drywall trowel or blade, and apply thin coats scraping across the area just to cover. Apply as many THIN coats as needed (allowing drying time between). Sand lightly with fine sand paper or sanding screen. Dust off and prime the newly patched areas.

It depends on the size of the hole. Conrad's solution is very valid for a larger hole. Small hole could be a nail hole or something much larger.

If you're talking about nail holes where pictures where hung spackeling is the easiest to use, it dries quickly and doesn't shrink. It has no strength and can't be used for anything more than filling in a nail hole or a small dent or crack.

A larger hole, say were a door knob knocked a hole in the wall behind it would require Conrad's method.

Plaster can be used, it is a dry material that is mixed with water. Setting plaster sets up very quickly but sanding it is difficult at best. Compound usually comes premixed, though some can be mixed on site. It normally takes longer to dry and is easier to sand. Pros will use setting compound or plaster when they want to get in and out quickly. It allows them to make the repair, and paint within an hour or two. With regular compound it may be a several day process to repair a hole and get it painted.

So how small are your small holes?

I guess I was thinking about the areas with peeling paint (down to the drywall paper surface). Several layers of paint can build up a ridge when scraping off the loose stuff. And it is often easier to fill this shallow void with compound, rather than try to sand it flat.

Another concern is WHY the paint peeled in the first place? Make sure you have both checked for any water line or condensation leaks that could have caused moisture behind the wall where the damage occurred. And, most important, a vent fan to exhaust moisture from the bath area to the outdoors, not just an attic space.

Valid points Conrad. I suspect the walls weren't prepared properly and/or they are venting the bathroom while showering.

Scraping the loose paint off, feathering the edges of the paint, proper priming the walls and venting while showering should eliminate the peeling paint going forward.