My son has that. The doctors have told me its just baby ecsema. My daughter also gets a rash that comes like that that comes and goes, I have linked it to the soap and shampoo we were using when we bathe her. I have found a great place that has naturally made soaps, shampoos, etc that I have been buying my stuff from that now do not bother my daughters delecate skin. And the natural dry skin lotion I get from this same company has helped my sons dry skin a great deal! I was using eucerine on his dry skin problem like the doctors have told us to do, but it never really worked and so we stopped wasting our money on it. But this stuff is awsome! And I buy many other natural household products from them now, like household cleaners, and so much more. I decided to go with this companys products because they were all natural and if my kids should accidentally ingest any of them, they wouldnt get poisoned, worst case scenario would be just a little upset tummy.
But it sounds to me it is just baby ecsema... or if it comes and goes, it could be an allergic reaction to the soap or shampoo you use on her duing her bath. Sometimes they tend to dry out the skin (even the baby formulated ones) more than we expect.
Hope that helps hun.