What is a dermoid cyst? And why would a one year old get one?

Sack. A dermis cyst is a sack like structure under the skin. It is produced during fetal development when skin structures are trapped under the skin. There is not an exact cause.
Dermoid cysts. Dermoid cysts are unusual collections of various tissues within a sac like structure that can occur anywhere in the body but commonly are present in the ovary. They may contain teeth, hair, skin, etc. They are generally benign but can get infected. It is typically advised that they be resected.
A benign lesion. A dermoid cyst is a neuroectodermal remnant that can contain the full complement of structures produced by that cell line, ie, hair, teeth, etc. It is also known as a teratoma. They are benign entities which are present at birth and continue to enlarge over time so are typically removed when anesthesia risks are acceptable after 7 months of age. They occur spontaneously and have no known cause.
Dermoid. A dermoid cyst is a cystic teratoma that contains developmentally mature skin complete with hair follicles and sweat glands, sometimes clumps of long hair, and often pockets of sebum, blood, fat, bone, nails, teeth, eyes, cartilage, and thyroid tissue. Because it contains mature tissue, a dermoid cyst is almost always benign. From wiki.