You're right that he's using the wrong name, and the circle of power is the dispel magic circle a paladin gets when he's got a holy sword held unsheathed.
But he's right about the protection downgrade. In 1E all paladins, right from first level, have a continual Protection from Evil 10' Radius on them (a 4th level Cleric spell). "The protection encircles the recipient at a one foot* distance, thus preventing bodily contact by creatures of an enchanted or conjured nature such as aerial servants, demons, devils, djinn efreet, elementals, imps, invisible stalkers, night hags, quasits, salamanders, water weirds, wind walkers, and xorn. Summoned animals or monsters are similarly hedged from the protected creature. Furthermore, any and all attacks launched by evil creatures incur a penalty of -2 from dice rolls ”to hit” the protected creature, and any saving throws caused by such attacks are made at +2 on the protected creature‘s dice." (1E PH p 44 for the spell description)
*(ten feet for the 4th level spell and the Paladin ability)
In 2E this gets downgraded to just "A paladin is surrounded by an aura of protection with a 10-foot radius. Within this radius, all summoned and specifically evil creatures suffer a -1 penalty to their attack rolls, regardless of whom they attack. Creatures affected by this aura can spot its source easily, even if the paladin is disguised." (2E PH p27)
Really? In our 5E games people love to stay close to the Paladins, at least from 6th level on, because of Aura of Protection. Add the Paladin's Charisma bonus to ALL your saves as long as you're within 10' of him? ! Yes, please! And depending on your Oath it probably gets even better at 7th? Hoo baby.
Aura of Courage doesn't come along until 10th. And it's certainly nice, but more niche in utility.