Many dogs develop these hard tissue spots on their elbows due to the way they lie down. Some of them do it gently and slowly, some of them just drop their body down on the ground like a sack of potatoes. And, if the surface is hard, they develop these "camel hard spots" on elbows. Though, in your case, not the skin apperance, but the size of an egg would worry me. I do not know if skin cancer can occur due to a mechanical coercion in case he has hurt himself on something sharp, whether it could be some infection.