Dogs have a nasty habit of biting and gnawing on wounds. It looks like he/she's been going to town on that thing.
It looks like a really irritated hot spot. :/ Put some anti-itch soothing cream and neosporin on it...get onto him when he starts scratching, or it will never heal... you could get one of those cone things to put on his head to prevent that from happening. If it doesn't seem to get any better, take him to your vet..
Cool, yea just keep an eye on him & keep it clean. Don't want it to get infected.. my dog is a scratcher, too.
My cat had something very similar. It was called a "warble". Idk, all i know is a fly laid it's egg under my cat's skin, it hatched and was gone. Shit was wacky.