I have red dots on head of penis and the skin under my foreskin is peeling and leaving cuts. and it only itchy where the cuts are and peeling?

Irritation or Yeast: An irritant dermatitis or localized yeast or fungal infection can cause rashes in this area. See a physician for evaluation and prescriptions to treat this.

See Your Doctor: Most likely a yeast infection, but could be herpes. It needs to be examined and cultured (swab for herpes and KOH prep for yeast). Yeast can be easily treated, but can be a symptom of other problems, like diabetes.