Ulceration is a word describing a deep erosion of the skin layer (a really bad "sore"). The top layer of skin (epidermis) is gone and the underneath layer is red (dermis) and exposed. A veterinarian can determine this, thus the need for an exam.
Exposed penises are at risk for ulcers, trauma as well as the animals will sometimes overgroom them, causing more damage.
I am a rabbit lover myself. Please seek vet care ASAP to help your bunny!
Dr. Amanda
Small Animal Veterinarian
Special interest in canine and feline behavior.