Dominate Person says:
"Protection from evil or a similar spell can prevent you from exercising control or using the telepathic link while the subject is so warded, but such an effect does not automatically dispel it."
Protection from Evil:
"Second, the subject immediately receives another saving throw (if one was allowed to begin with) against any spells or effects that possess or exercise mental control over the creature (including enchantment [charm] effects and enchantment [compulsion] effects, such as charm person, command, and dominate person). This saving throw is made with a +2 morale bonus, using the same DC as the original effect. If successful, such effects are suppressed for the duration of this spell. The effects resume when the duration of this spell expires."
So they get a new save at +2 to totally suppress the spell. If that fails, Dominate is not suppressed.
Dominate says that Protection from Evil can prevent you from exercising control, not that it automatically does.
First, the subject gains a +2 deflection bonus to AC and a +2 resistance bonus on saves. Both these bonuses apply against attacks made or effects created by evil creatures.
Second, the subject immediately receives another saving throw (if one was allowed to begin with) against any spells or effects that possess or exercise mental control over the creature (including enchantment [charm] effects and enchantment [compulsion] effects, such as charm person, command, and dominate person. This saving throw is made with a +2 morale bonus, using the same DC as the original effect. If successful, such effects are suppressed for the duration of this spell. The effects resume when the duration of this spell expires. While under the effects of this spell, the target is immune to any new attempts to possess or exercise mental control over the target. This spell does not expel a controlling life force (such as a ghost or spellcaster using magic jar), but it does prevent them from controlling the target. This second effect only functions against spells and effects created by evil creatures or objects, subject to GM discretion.
So, first question: Is the bad guy wizard evil? If he isn't, Protection from evil has no effect. End of story.
If he is, the NPC gets a +2 resistance bonus on his saves vs. that wizard (along with a +2 deflection bonus to AC) (First effect).
As the Dominate Person is an effect the NPC is under when receiving the Protection spell, he is entitled to another saving throw (with a +2 morale bonus on top of his +2 resistance bonus) to suppress being dominated. (Second effect)
The immunity part of the second effect paragraph comes into play for any new attempt to charm or dominate the protected creature. As long as Protection from Evil persists, any subsequent charm/command/dominate on the protected creature from evil casters will auto-fail.
Long story short, all the NPC in your example gets is a re-roll on his save with a +2 resistance bonus and a +2 morale bonus (for a total of +4, unless he already enjoys morale and/or resistance bonuses to saves). Provided the enemy wizard is evil in the first place.