The frist two things that come to mind are mange and allergies. Mange is caused by parisites and will cause the dog to lose his fur. Allergy problems can also causes inching and a rash.
It could be he got into some kind of poison ivy or poison oak. He could also have an allergy. Does it itch him? Watch it for a few days and if it doesn't go away take him to the vets.
Your dog could have developed a skin condition. Many times overly dry skin can occur randomly in dogs in areas of friction such as armpits. Also look out for bites.
