What you are seeing know is the wound response that a tree grows in response to physical damage. It is impossible to know what originally caused the damage, but damage can be caused by anything from another branch rubbing or scraping it, deer rubbing, European hornets peeling off bark and more. Trees have a remarkable ability to wall off the damaged area, but on a small tree like it may be best to prune out the wounded area and allowing the branch to the right to grow into the dominant branch on that section of the tree.