@liz
I'm fairly certain it started as a wound, he was tracking blood all over the patio and we cleaned his wound and bandaged it.
You're right, I didn't mention what we were doing about it. At first we just bandaged it with gauze and Neosporin and an ace bandage with a sock over it (to keep him from unraveling the Ace bandage), and we changed it once a day. After a while the skin between his toes started to get irritated so we took the bandage off and used a cone to keep him from licking. We took a wait and see approach. Today, however, the paw has gotten worse. It looks like we'll need to be seeing a vet ASAP. Here's an image of you're interested.