*Always wear a dust mask when sanding joint compound or otherwise dealing with sanding dust*
Using the right sandpaper to sand joint compound can make the difference between a smooth repair and one with sanding marks. Drywall joint compound is a relatively soft material and easily sanded in most cases. It doesn't take much abrasive to remove it quickly. The best general grade of sandpaper for this job is about 120 grit. For ready–mixed compound you can sometimes use 220 grit if the finish is very soft. If you're using 120, wear the sandpaper down a bit by rubbing two pieces together or by sanding some wood trim before sanding ready–mixed compound. If you're sanding setting compound, there's no need to wear the abrasive down before beginning.
Before sanding make sure all joint compound is completely dry, you'll ruin the paper and the patch if you sand it wet. For ready–mixed this can take 12 hours or more. For setting compound the time is much shorter, depending on the grade and the depth of the repair it can dry in 30 minutes to a couple of hours.
Tear a 8x11 inch sheet of sandpaper in half on the long edge. Fold one piece in half and hold it with the fold away from you. Fanned out your fingers to apply even pressure and use a light touch. Start on one side of a repair and sand in wide arching strokes to gradually smooth out imperfections. Be careful sanding around the edges on wall repair patches, especially when dealing with drywall. The sandpaper can dig into the surrounding surface while you're trying to smooth out rough edges. Lightly sand the edge to feather a smooth transition between the two surfaces. To sand in corners when finishing drywall, fold the paper in half again. Open it back up to form a 90° fold and use it to sand both sides of the corner at the same time.