A sebaceous cyst is a term commonly used to refer to either:
Epidermoid cysts (also termed epidermal cysts, infundibular cyst)
Pilar cysts (also termed trichelemmal cysts, isthmus-catagen cysts)Both of the above types of cysts contain keratin, not sebum, and neither originates from sebaceous glands. Epidermoid cysts originate in the epidermis and pilar cysts originate from hair follicles. Technically speaking, then, they are not sebaceous cysts. "True" sebaceous cysts,  which originate from sebaceous glands and which contain sebum, are relatively rare and are known as steatocystoma simplex or, if multiple, as steatocystoma multiplex. Medical professionals have suggested that the term "sebaceous cyst" be avoided since it can be misleading. : 31  In practice, however, the term is still often used for epidermoid and pilar cysts. Signs and symptoms
The scalp, ears, back, face, and upper arm, are common sites of sebaceous cysts, though they may occur anywhere on the body except the palms of the hands and soles of the feet. They are more common in hairier areas, where in cases of long duration they could result in hair loss on the skin surface immediately above the cyst. They are smooth to the touch, vary in size, and are generally round in shape.
If pus has already formed, then incision and drainage should be done along with avulsion of the cyst wall with proper antibiotics coverage. An approach involving incision, rather than excision, has also been proposed. References
External links

Overview at University of Maryland Medical Center
Epidermal Inclusion Cyst at eMedicine