Sorry about the bad photography.  This image (vaguely) shows what happens when people work on houses who have no talent and no clue about properly fixing a hole in a wall.  Not only did the slopped-on joint compound fall apart, the numbskulls didn't even have the brains to put the floor molding back in place which lead to this spot getting bumped and shattered a second time. Here's how to properly mend an area like this one:
1) Measure the distance between the two joists (2X4 vertical supports) inside the wall.
2) Cut out a nice, neat rectangle that overlaps half way across the joists.
3)  Install a nice, neatly cut piece if dry wall in the new opening.
4)  Screw (NOT NAIL!!!!) the piece into place at the joists.
5) Slather some joint compound into the seams.
6) Muck up some pre-measured dry wall joint tape with joint compound and cover open seams.
7) Use a 5" spreader to smooth out the tape.  Let dry.
8) The next day, slather on some more joint compound using an 8" spreader to blend the repair's hump into a gradual plane that will eventually become even more gradual with the ensuing steps.  Let dry overnight.
9) Use an emery screen to lightly sand down any high points and slather on some more joint compound using a 10" spreader.  Let dry overnight.
10) Using your trusty emery screen, sand it down to a smooth finish.  Prime.  Let dry.  Paint  Let dry Paint again.
11) Replace or create new floor moldings and install.