A common fungal infection you can get on or around the penis is commonly known as "jock itch." It's easily treated using an antifungal ointment or powder, but it's probably a good idea to see a doctor about it just so you can confirm whether or not this is the case.
Another possibility is that the skin is just irritated from rubbing against underwear or from masturbation was a bit rough. If so, it'll heal up in a day or two.
Ha. Thats disturbing... I was hoping to be able to take care of this without visiting the doctor though. I'm still in High School and was hoping to not get my parents invovled if I could possibly fix the issue by myself. If it helps I have not been sexual involved before and if it was a fungus infection it hasn't spread... Perhaps it's just scratched up skin that really needs to be fixed.
It sounds like you might have some sort of fungal infection or a reaction of some kind, I advise you to go to your doctor and have it checked out.