Ellie
It sounds like you may have a hair follicle infection, which could definitley cause a cyst to enventionally form just beneath the skin. Cysts can be relatively harmless and usually disappear after awhile. If you have a strange odor, it's probably the kretin (sp?) in the cyst. If it's tender and sore, there's a chance it could be infected.
Obviously, to be on the safe side give your doctor a visit.
But I don't think it's anything life threatening.

