Woodpeckers sometimes will damage the wood siding on a home, especially softer wood such as cedar. Make sure there are no pests invading the siding and attracting the birds. To repair the damage you will need a wood filler or two-part adhesive of epoxy resin and hardening putty. For more information check below.
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In order to fill wood you need a special filler that is designed for wood. You can buy wood putty at all local hardware stores in your area. Cleanj up the mess you have now, sand down the wood and use the wood putty to fill in the holes there.
You may need to add some backing to the hole if it is too large to just fill it.