My son had an Inguinal Hernia, which is what it sounds like your son might have. It is a hernia that shows up in the private area, and distends when the child is upright and active, but when they lay down or sit, it can actually go back in..... a good thing, but makes it hard to notice.
My son was actually only about 18 months old, and I noticed and knew what it was (how, I don't know), but took him to the dr. and of course it had gone away. When the dr. said he couldn't feel anything and went to send me away, I parked my butt in the waiting room and let him run around for awhile in just a diaper, and when it was showing again, showed the dr.
He did end up having surgery to repair the hole or whatever it is. Wasn't really a big deal, but of course, I was so upset at the time.
No complications, and he doesn't even have a scar now.
Keep an eye on it.
Good luck,
KATIE