It is very difficult to answer this question without seeing the lesion. According to the description, you might be experiencing some type of infection but that's not for sure. A bad smell from the penis could also be due to poor hygiene. Secretions from the skin glands are collected in the space between the penis head and foreskin. This secretion together with desquamated cells and local bacteria is called smegma. Smegma has bad small due to the local bacterial activity. You can visit your GP or a dermatovenerologist if necessary for a consultation and advice.