Dermoid cysts are a type of non-cancerous tumor that forms in the middle layer of the skin during fetal development. They are fairly common in dogs, present at birth and probably hereditary. In their walled-off centers, these cysts contain skin flakes, hair, hair follicles, sweat and sebaceous gland secretions, nerve remnants and glandular debris. Dermoid cysts develop up singly or in clusters mostly along the top of the neck and back, which in medical lingo is called the dorsal midline. They also can occur on or around the eyes and ovaries. Dermoid cysts usually are harmless. Most dogs show no severe signs of discomfort or distress from these skin masses, other than itchiness. Occasionally, the cysts rupture and drain a thick, yellowish-brown fluid, although they usually refill over time. When a dermoid cyst ruptures for any reason, it can become inflamed, infected and quite painful.