There can be many root causes for Hot Spots such as an allergic reaction to a flea, tick, or mosquito bite, allergic reaction to an ingredient in their food or something else they have ingested, seasonal outdoor environmental allergies (i.e.: pollen, grass), indoor environmental allergies (i.e.: carpet fibers, dust, laundry detergent), ear infections, dense wet coat that doesn’t dry thoroughly, and the list goes on. The common areas for Hot Spots to occur are the neck, under/behind the ears, paws, legs, and hind quarters, though they can also develop pretty much anywhere on the body. 

The veterinary term for Hot Spots is Pyotraumatic dermatitis. It is the acute (meaning severe and sudden) onset of a self-induced localized skin lesion initiated by rapid increase of a bacteria (usually Staphylococcus pseudintermedius) on the skin surface which is worsened by self-trauma (i.e.: chewing, scratching, licking) to the area. The bacteria grows in an area of inflammation, moisture, or dense or matted fur. The irritation caused by the bacteria causes your dog to obsessively chew, lick, and / or scratch the area in an attempt to relieve the irritation and discomfort. Though the initial location is on the skin surface, if left unnoticed and untreated, the further aggravation of the area by your dog will cause more inflammation and could also cause hair loss and the lesion to start weeping fluid. This can then progress to a crusty scab over the lesion.