Its a corneal dermoid, that’s to say an area where instead of transparent cornea there is skin; sometimes, as in this case, hairy. It isn’t directly heritable although some breeds such as dachshunds are said to be predisposed. Superficial keratectomy removes it as can be seen here – the ulcer left will heal in a few days. Looking in the literature its surprising how little information there is on the condition in dogs which, while not seen every day, is not rare. A recent Japanese paper is available online at http://www.vetsci.org/2005/pdf/369.pdf for those wanting to know more.