Yael, a little boy I know has the same thing. It's apparently because he has a "fat pack" which hides most of his penis, like your DS when his mum puts a bit of pressure on the area it pops out. She has had it checked out by several Drs (he was prem so he saw Drs all the time) and they have said that by the time he was 2 it would have cleared up. If it hadn't though they said to get him checked out again & they might perform a small op to remove some of the fat if she was worried. Her comment was, I don't think I really want to give my son liposuction at 2 years old! So she said she'd just wait & see how it goes...