First I think that in the definition of a peak the inequality is strict (you will see why we need this in the proof). But even if it isn't here are some examples:
Let $a_n=\frac 1n$. This sequence has infinitely many peaks (at $1,2,...$). The monotone subsequence here is any subsequence of $a_n$. Another example (supposing the inequality is indeed non strict as you say): Let $a_n=(-1)^n$. This sequence has peaks at $0,2,...$. The monotone subsequence here is $a_{2n}=(-1)^{2n}=1$.
Let $b_n=\frac 1n+2013$, $n\le 7$ and $b_n=(1+\frac 1n)^n$, $n>7$. The peaks are $n=1,2,3,4,5,6,7$ and the monotone subsequence is $b_{n+7}=(1+\frac 1{n+7})^{n+7}$.
All the sequences above are bounded. Providing examples of peaks for unbounded sequences is equally simple
The notion of a peak is used only in the proof of the Bolzano Weierstrass Theorem (I myself hasn't seen it used anywhere else, but if anyone has, please comment on this). That's what makes the proof so magical. I don't understand why you say "Further by explaining using peaks, did we not already assume the sequence as monotone decreasing"?
For completeness here is the proof:
Suppose that $\left(a_n\right)$ has an infinite number of peaks $k_0<k_1<k_2<...<k_n<...$ and consider the subsequence $(a_{k_n})$. Then, $(a_{k_n})$ is strictly decreasing since $k_n>k_m\Rightarrow a_{k_n}<a_{k_m}$ and thus $(a_{k_n})$ is monotone.
Suppose that $\left(a_n\right)$ has an finite number of peaks and let $N\in \mathbb{N}$ be the last (greatest) peak.
Then $k_{0}=N+1$ is not a peak and so
\begin{equation}\exists k_1>k_0\in \mathbb{N}:a_{k_{1}}>a_{k_{0}}\end{equation}
Having defined $k_n$ such as that $k_n>k_{n-1}>N$ then
\begin{equation}\exists k_{n+1}>k_n\in \mathbb{N}:a_{k_{n+1}}>a_{k_{n}}\end{equation}
The subsequence $(a_{k_n})$ is obviously increasing and so it is monotone