children often pick at sensitive areas of their skin or lips to releive tension, boredom or to self-soothe (the same way adults bite their lips or nails). You may wish to track this behavior to see when it occurs, and try to guess what triggers it. For example, does he do it when he's bored, or when he's in a new situation. If you can identify a pattern, you can try to help steer him towards other behaviors that will satisfy the same need, such as hugging a toy, chewing a teething ring, or squashing some silly putty.
Some children crave extra stimulation. Even what seems to us to be painful can feel good to them. The reason to be concerned is that habits that are painful can become very hard to break. When kids do themselves damage, such as through excessive picking, the body releases chemicals to make them feel better. These chemicals are the same ones that make give us the pain/pleasure feeling after we eat spicy food. Thus the child can get used to those good feelings after biting, which makes it hard to break the habit. Sometimes kids end up doing some fairly severe damage to their bodies when they can not stop picking.
If simple techniques like redirecting or distraction do not work, you may wish to consult a psychologist. A psychologist can help teach the child alternative behaviors, and help you set up a behavior plan to make that happen with lasting results. Your pediatrican should be able to make a referral.
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