Limbal dermoids are benign congenital tumors that contain choristomatous tissue (tissue not found normally at that site). They appear most frequently at the inferior temporal quadrant of the corneal limbus. However, they may occasionally present entirely within the cornea or may be confined to the conjunctiva.  They may contain a variety of histologically aberrant tissues, including epidermal appendages, connective tissue, skin, fat, sweat gland, lacrimal gland, muscle, teeth, cartilage, bone, vascular structures, and neurologic tissue, including the brain. [2, 3, 4] Malignant degeneration is extremely rare. See the image below.
The most common system for classifying dermoids is based on the location of the lesion and separates the lesions into 3 broad categories. The most common dermoid is the limbal dermoid, in which the tumor straddles the limbus. Limbal dermoids are usually superficial lesions but may involve deeper ocular structures. The second type involves only the superficial cornea, sparing the limbus, the Descemet membrane, and the endothelium. The third type of dermoid involves the entire anterior segment, replacing the cornea with a dermolipoma that may involve the iris, the ciliary body, and the lens. Also see Dermoid, Orbital.
Several theories have been proposed to explain the development of limbal dermoids. One theory suggests an early developmental error resulting in metaplastic transformation of the mesoblast between the rim of the optic nerve and the surface ectoderm. Another proposed mechanism is sequestration of the pluripotential cells during embryonic development of the surrounding ocular structures. The exact pathogenesis probably varies from case to case.
Limbal dermoids generally are not inherited, although some exceptions have been reported. Familial presentation of limbal dermoids in association with systemic disorders, such as Goldenhar syndrome, is well recognized and follows a multifactorial pattern of inheritance.  Two rare forms of epibulbar dermoid (ie, the annular limbal form, the corneal dystrophy form) presenting in multiple family members have been reported.
The estimated worldwide incidence of limbal dermoids ranges from 1 case per 10,000 population to 3 cases per 10,000 population.
In a study at the Armed Forces Institute of Pathology, 7.5% of epibulbar lesions examined were choristomas. According to this study, 52% of epibulbar choristomas were located in the bulbar conjunctiva, 29% at the limbus, 6% on the cornea, 4% at the caruncle, and 2.5% in the conjunctival fornix or the palpebral conjunctiva. 
In a study of epibulbar choristomas in patients with Goldenhar syndrome, 14% were nasal, 86% were temporal, 16% were superior, and 84% were inferior. 
Visual morbidity may result from encroachment of the lesion into the visual axis, development of astigmatism, or formation of a lipid infiltration of the cornea, which obstructs the visual axis.
Large limbal dermoids can be cosmetically disfiguring.
Staphyloma formation adjacent to dermoids has been reported and may be associated with spontaneous perforation of the cornea or the sclera.
No racial predisposition exists.
Limbal dermoids occur with equal frequency in males and in females.
Limbal dermoids are present at birth but may not be recognized until the first or second decade of life. They may also appear to enlarge as the body matures.
In a study conducted at the Armed Forces Institute of Pathology, 36% of epibulbar lesions removed in the first decade of life were choristomas. They constituted about 23% of epibulbar lesions removed in the second decade of life, 7.2% of lesions removed in the third decade, and 0.9% of lesions removed in the fourth decade. 
In another study conducted at the Wilmer Ophthalmologic Institute, epibulbar choristomas constituted 33% of epibulbar lesions removed before age 16 years and 2.2% of epibulbar lesions removed after age 16 years.