Thanks for posting your query at DoctorSpring.com. I can understand your concern.
From the picture and from your history, it seems to be a sebaceous hyperplasia on the scalp. Usually they are benign but can sometimes get malignant.
The treatment for it would be surgical excision by your doctor. It can be sent to the lab for pathological examination under the microscope.
There is no cause as to why it occurs, it's just like a cyst. It's not infectious and doesn't cause any symptoms by itself.
Most commonly if there are any associated abnormalities, then they are present since birth.
This link is for your reference.
Please let me know if you have any queries. I will be happy to answer all of them.
Patient replied :
Thank you for replying. Is it expected grow? I've noticed my hair thinning out quiet a bit around that area, if I don't seek treatment will I continue to lose hair?
Thanks for your reply.
It may grow in size as age progresses, but usually there is a hairless patch around the sebaceous nevus.
However, getting the nevus excised wouldn't affect the thinning of hair. A hairless patch is a common finding even before the nevus appears. If you are getting a progressive thinning, it could be due to the nevus itself or due to other unrelated cause.