It s hard to say without seeing it, but you are either dealing with a fungal/yeast infection (eg, tinea corporis, or candida), or a bacterial skin infection caused by staph bacteria. Both tend to itch at first, but can also become painful. Yeast and Fungi do happen a lot on children and especially in the buttock region (just like diaper rash). The more concerning bacterial infection (staphylococcus) will usually spread very fast and if the skin breaks down, it will form a honey crusting type of appearance. The swollen ring you described and spreading by small satellite lesions makes me think this is a fungal or yeast infection. You can try ketoconazole cream on the area to see if it controlls it. Otherwise, I would recommend getting it examined by a doctor for proper treatment. Good luck.