What is it for?
Polishing compound is used to help bring out the shine or smooth the surface out. Polishing compound is very useful when blending in new and pre-existing paint.
How do you use it?
The most common way is to apply liberal amount to a micro fiber cloth or a buffing wheel and rub in circular motion. You will continue this process for several minutes or until the desired finish is achieved.
Note: Rubbing compound and polishing compound are not the same thing, though sometimes referred as the same. This is a common confusion. Think of these compounds as VERY fine grit sand paper. Some are meant to cut through paint/clear coat and some are meant to build a high gloss finish.