In 1895, Jadassohn first described nevus sebaceous (see the image below), a circumscribed hamartomatous lesion predominantly composed of sebaceous glands. Sebaceous nevi and verrucous epidermal nevi are closely related, and many authors regard them as variants.
See 13 Common-to-Rare Infant Skin Conditions, a Critical Images slideshow, to help identify rashes, birthmarks, and other skin conditions encountered in infants.
In nevus sebaceus, postzygotic somatic mutations may result in various clinical expressions of mosaicism. Mutations in pluripotential cells may give rise to hamartomas with multiple cell lines.
Nevus sebaceus occurs with equal frequency in males and females of all races. Of newborns, 0.3% are affected by nevus sebaceus.
Sebaceous nevi are sporadic and occur with equal frequency in males and females of all races.
Nevus sebaceus occurs with equal frequency in males and females of all races.
Males and females are equally affected by nevus sebaceus.
Nevus sebaceus is usually noted as a solitary lesion at birth or in early childhood, whereas the characteristic features may not develop until puberty.
The medical importance of a solitary nevus sebaceus relates to the description of both benign change and, in some cases, malignant neoplastic change. Malignant transformation occurs in 10-15% of lesions in some series, although others suggest that this rate may be much lower. Sebaceous nevi generally occur during adolescence or adult life. Rarely, changes have occurred in children younger than 5 years. The most common malignant neoplasm arising in this disorder is basal cell carcinoma. Studies indicate that the development of basal cell carcinoma or any other malignant neoplasm is very rare. The most frequent benign tumor is trichoblastoma. 
Other benign and malignant tumors include syringocystadenoma papilliferum arising from the apocrine sweat glands, keratoacanthoma, apocrine cystadenoma, leiomyoma, and sebaceous cell carcinoma. Rarely, malignant eccrine poromas and apocrine carcinomas have been reported to result in widespread metastases and death.
Nevus sebaceous is a rare benign tumor in children that usually presents with warty patches of hair loss on the scalp.
The development of secondary malignant neoplasms within the nevus sebaceus is rare and occurs almost exclusively in adults.
Old reports overestimate the frequency of malignant tumors. This was due to misdiagnosis of basal cell carcinomas that were in fact trichoblastomas (benign form of neoplasm that look like basal cell carcinoma histologically).
Possible signs of malignancy include ulceration or a new "bump" on the area; thus if any change is seen within the nevus sebaceous, the patients should seek medical advice.
Given the low risk of malignant transformation in children, clinical follow-up is considered to be a safe alternative to prophylactic surgical excision.
If treatment is chosen, surgical excision would be the treatment of choice; however, the timing of the surgery is controversial.
Factors to be considered include the size and location of the nevus, its cosmetic significance, and the risks and benefits of early excision (which usually requires general anesthesia) versus delayed excision (which is usually with local anesthesia).