Hot spot(s) occur usually in the dog, and are characterized by red, inflamed patches of skin which can ooze a clear or yellowish discharge.
These areas are extremely sensitive to the dog, and actually are a result of the dog constantly licking, biting, or scratching an area of skin until raw and inflamed.  The cause of a hot spot can be a number of things, but usually anything which can result in the release of histamine or other "mediators of inflammation" as in cases of allergies, can start the process. 
Stings from insects, scratches, small scrapes or wounds, all can be enough to cause the release of these inflammatory mediators, which start the itch-scratch cycle.  What makes a hot spot different from another self-induced skin lesion known as an acral lick granuloma, is that the hot spot is usually created within hours.  The acral lick granuloma takes days to months to form. 
Also, the hot spot can occur anywhere on the body, and is less likely to occur on the limbs, where acral lick granuloma tends to form mainly on the limbs.  Both of these conditions however, can be started from the release of inflammatory mediators in the area on the skin affected.
Treatment of the hot spot usually involves clipping the hair around the area of skin affected.  This region is then cleansed with mild soap and water, and topical cortisone products, or anti-histamine products are applied.  The main emphasis of treatment is geared towards keeping the dog from scratching at the area, as this is what started the hot spot in the first place. 
Sometimes covering the area if possible, or putting a sock over the dog's foot to prevent scratching is advised.  Clipping the nails helps as well.  If an underlying cause is found such as an allergic condition, treatment with oral medication is then advised.  Usually this is associated with multiple hot spot lesions.  Single small lesions tend to respond well to topical therapy alone.